Every year, the Australian Securities and Investments Commission (ASIC) releases its insolvency statistics, offering one of the clearest snapshots of Australia’s business environment.

The latest figures show that while first-time external administrations eased slightly compared to the previous financial year, business failures remain well above historical levels. More importantly, the data highlights which industries continue to face the greatest pressure and where business owners should be paying close attention.

In this episode of The CEO Breakdown, Latitude Accountants’ CEO John Saade analysed ASIC’s latest insolvency data and explained what the numbers really mean for Australian business owners. Rather than viewing the figures as simply another economic report, John highlighted the underlying business lessons around cash flow, profitability, debt management and financial planning.

For Australian business owners, the message is straightforward: understanding your numbers has never been more important.

What Happened?

ASIC’s latest statistics recorded 12,819 companies entering external administration for the first time during FY2026. While this represents a modest decline from the previous financial year, it remains significantly higher than insolvency levels recorded only a few years ago. The broader trend since 2020 shows a substantial increase in business failures across Australia.

The data includes several forms of external administration, including:

• Creditors’ voluntary liquidations
• Court-appointed liquidations
• Voluntary administrations
• Controller appointments
• Small business restructures

Together, these figures provide insight into the financial pressures affecting Australian companies and the industries experiencing the greatest challenges.

Construction Continues to Lead Business Insolvencies

The construction industry once again recorded the highest number of insolvencies, with more than 3,400 companies entering external administration.

While every business is different, construction companies continue to face several ongoing pressures, including:

• higher labour costs
• increased material prices
• tight profit margins
• delayed customer payments
• fixed-price contracts signed before inflation increased

Construction businesses often carry significant overheads while waiting for progress payments, making cash flow management particularly important.

The ASIC data suggests these pressures continue to impact builders, subcontractors and construction-related businesses across Australia.

Hospitality and Cafés Remain Under Pressure

Accommodation and food services recorded the second-highest number of insolvencies, with around 2,000 businesses entering external administration.

Hospitality businesses continue to face a combination of challenges, including:

• increasing wages
• rising food costs
• higher commercial rents
• increased utility expenses
• cautious consumer spending

As discussed by John Saade, cafés remain one of the sectors experiencing significant financial pressure due to their relatively high operating costs and competitive market conditions.

Operating a busy venue does not necessarily translate into healthy profits if margins continue shrinking.

Retail Businesses Continue Feeling the Squeeze

Retail insolvencies also continued to trend upwards.

Many retailers are navigating changing consumer behaviour as households become more cautious with discretionary spending.

Common challenges include:

• reduced foot traffic
• increasing rent
• higher supplier costs
• growing online competition
• tighter cash flow

Businesses with limited financial reserves may find it increasingly difficult to absorb prolonged periods of lower sales while continuing to meet operating expenses.

Understanding the Different Types of Insolvency

One of the most valuable parts of John’s analysis was explaining the different forms of external administration.

Creditors’ Voluntary Liquidation (CVL)

This is the most common form of insolvency.

A creditors’ voluntary liquidation occurs when company directors determine the business cannot continue operating and appoint a liquidator themselves.

According to the transcript, approximately half of first-time external administrations fell into this category.

Court-Appointed Liquidation

Court-appointed liquidations have continued increasing year-on-year.

In the video, John notes this trend aligns with stronger debt recovery activity by creditors, including action involving unpaid ATO debts. While every case differs, the increase reinforces the importance of addressing financial issues before formal legal action becomes necessary.

Voluntary Administration

Voluntary administration provides companies with an opportunity to assess whether the business can be restructured or whether liquidation is the most appropriate outcome.

Small Business Restructuring

Small Business Restructuring (SBR) was introduced to provide eligible small companies with another pathway to address financial difficulties while continuing to operate where appropriate.

The transcript notes that restructuring activity has declined compared to earlier years following its post-COVID increase.

New South Wales and Victoria Recorded the Highest Insolvency Numbers

The state-by-state breakdown reflects Australia’s largest business centres.

According to the ASIC figures discussed in the video:

• New South Wales recorded 5,311 first-time administrations.
• Victoria recorded 4,060.
• Queensland recorded 2,685.

While these states naturally have larger business populations, they are also experiencing significant economic pressure across several industries.

Why This Matters for Business Owners

Business insolvency is rarely caused by a single issue.

More commonly, it results from a combination of:

• declining cash flow
• rising operating costs
• shrinking profit margins
• unpaid customer invoices
• accumulating tax obligations

John’s conclusion in the video focuses less on the insolvency numbers themselves and more on the financial fundamentals every business owner should understand.

Knowing your numbers can help identify problems early—before they become unmanageable.

What Business Owners Should Do Now

Whether your business operates in construction, hospitality, retail or another industry, now is a good opportunity to review your financial position.

Practical steps include:

• Prepare updated cash flow forecasts.
• Monitor business profitability regularly.
• Review pricing to ensure margins remain sustainable.
• Follow up overdue debtors promptly.
• Stay on top of tax lodgements and payment obligations.
• Review major operating expenses.
• Seek professional advice if financial pressure is increasing.

Early action generally provides more options than waiting until financial challenges become critical.

Common Mistakes to Avoid

Many businesses experiencing financial pressure make similar mistakes.

These include:

• relying solely on sales growth instead of monitoring cash flow
• Ignoring outstanding ATO obligations
• delaying financial reporting
• waiting too long to seek professional advice
• assuming financial problems will resolve without making changes

Strong financial management is about making informed decisions early rather than reacting when options become limited.

Frequently Asked Questions

What is external administration?

External administration is a formal process where an independent insolvency practitioner takes control of a financially distressed company.

What is a creditors’ voluntary liquidation?

A CVL occurs when company directors decide the business can no longer continue trading and appoint a liquidator.

Why are construction companies experiencing high insolvency rates?

Many construction businesses continue facing higher costs, delayed payments and tight profit margins.

Why are cafés and restaurants struggling?

Increasing wages, rent, food costs and changing consumer spending have placed pressure on many hospitality businesses.

Does having ATO debt automatically lead to liquidation?

No. Many businesses successfully manage tax debt through payment arrangements or professional advice. However, unresolved tax obligations can increase financial pressure.

What is a court-appointed liquidation?

A court appoints a liquidator following an application by an eligible creditor or another authorised party.

Which states recorded the highest insolvencies?

According to the ASIC data discussed by John Saade, New South Wales recorded the highest number, followed by Victoria and Queensland.

Is cash flow more important than profit?

Both are important, but businesses can experience financial distress if cash flow is insufficient to meet day-to-day obligations, even when they appear profitable.

Should business owners review their financial reports regularly?

Yes. Regular reporting helps identify potential issues before they become significant financial problems.

When should businesses seek professional advice?

Ideally, before financial pressure becomes severe. Early advice generally provides more options to improve outcomes.

Final Thoughts

ASIC’s latest insolvency statistics provide more than just a snapshot of business failures—they highlight the financial pressures many Australian businesses continue to face.

Construction, hospitality and retail remain among the hardest-hit industries, while the continued rise in court-appointed liquidations reinforces the importance of staying on top of cash flow, tax obligations and financial reporting. As John Saade explains, the real lesson isn’t simply that businesses are failing—it’s that business owners need to understand their cash flow, debtors, profitability and overall financial position before challenges become difficult to manage.

Regardless of your industry, regularly reviewing your financial performance and seeking advice early can help you make more informed decisions and build a stronger, more resilient business.

Need Help Understanding Your Business Numbers?

If you’re unsure how this update affects your business, tax position or cash flow, speak with Latitude Accountants. Our experienced team works with businesses across Australia to improve cash flow, manage tax obligations, strengthen financial performance and help business owners make better decisions with confidence.

📍 Sydney Olympic Park | Marrickville | Melbourne | Loxton
📞 1300 706 597
📧 info@latitudeaccountants.com.au

Disclaimer

This article is for general informational purposes only and does not constitute accounting, taxation, financial, legal, insolvency, or business advice. The information is based on publicly available sources and is current at the time of publication. As every business’s circumstances are different, you should seek professional advice before making any financial or business decisions.