Australian business insolvencies remain near record levels despite showing the first signs of easing, according to new figures released by the Australian Securities and Investments Commission (ASIC).
In the 2025–26 financial year, 14,011 companies entered external administration, down from a peak of 14,722 in 2024–25.
Construction continued to account for the largest share of insolvencies, in which 3,472 companies went into external administration, a 3.4 percent decrease from the previous financial year.
Accommodation and food services ranked second, with 2,078 companies entering insolvency, down from 2,476 in 2024–25—a decline of 16 percent.
These two industries, along with other services, retail trade, and professional, scientific and technical services, rounded out the five most affected sectors.
Since 2021, a total of 52,190 companies entered insolvency, with the 2024-2025 and 2025-2026 financial years being the top years where most went under.
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Increased Pressures for Businesses
According to the Reserve Bank of Australia (RBA), the current level of business insolvencies reflected the difficult economic conditions of recent years.
Businesses have faced weaker consumer demand as households reduced discretionary spending in response to high inflation and rising interest rates. At the same time, many firms have continued to grapple with higher labour costs, increased input prices and elevated financing costs.
In its most recent Financial Stability Review in March, the central bank says insolvencies in the construction industry could be partly explained by “ongoing wage and input cost” pressures.
It also found a notable increase in the number of companies that had unpaid taxes of over $1 million (US$700,900) owing to the Australian Taxation Office (ATO). This number had increased from 5 percent in 2021 to 9 percent in 2025.
Furthermore, the RBA identified cash flow constraints and labour shortages as key challenges for the retail, manufacturing, and transport sectors. Energy price shocks have also increased cost pressures on energy-intensive industries.
Pandemic Lifelines Delayed Insolvency
The RBA attributed the insolvency trends to the unwinding of unusually low insolvency levels during the COVID-19 pandemic.
In its April 2025 Financial Stability Review, the central bank said insolvencies had risen “sharply” over recent years but remained only slightly below their long-run pre-pandemic trend when viewed cumulatively.
According to the bank, insolvencies were artificially suppressed during the pandemic by temporary government support measures, including financial assistance and changes to insolvency rules.
“By increasing businesses’ cash flows, the support measures reduced the share of businesses facing cash shortfalls and prevented many firms from failing during the pandemic,” the report reads.
“Direct cash transfers and precautionary saving helped most businesses accumulate substantial cash buffers through the pandemic period.”
As those measures ended, business failures began returning to more normal levels, particularly among firms with “underlying issues,” such as poor management or weak financial control.
Many of these businesses had delayed insolvency while government support remained in place but became financially unviable once repayment obligations resumed.
