iscover 
New figures from the Australian Financial Security Authority (AFSA) show 1,093 business-related personal insolvencies were recorded in the June quarter, up from 928 in the same period last year.
The rise was sharper than the overall increase in personal insolvencies, which climbed 13.1 per cent over the year to 3,596.
Business-related personal insolvencies also increased 14.4 per cent across the financial year 2026, reaching 4,046 cases.
AFSA’s figures also show people with a history of business involvement remain a significant part of the personal insolvency picture, with 30.4 per cent of people entering personal insolvency in the June quarter reporting business involvement.
Overall, 13,465 Australians entered personal insolvency across FY26, a 9.9 per cent increase on the previous financial year. Bankruptcies rose 9.6 per cent in the June quarter, while debt agreements increased 17.1 per cent.
While insolvencies have been creeping up since 2021, AFSA’s data shows they remain significantly below levels recorded in 2016–19.
Business failures carry a personal cost
Michael Chan, principal of insolvency specialist Jirsch Sutherland, said failures in business often take time to flow through to personal insolvency.
“The personal consequences of a company failure often emerge later; personal insolvencies have historically followed corporate insolvencies by nine to 12 months,” he said.
“Corporate insolvency doesn’t necessarily end when the company closes. For directors, the impact can surface months later through personal guarantees, loans secured against the family home and outstanding tax liabilities.”
Chan added that bankruptcy wasn’t the only option.
“For example, Personal Insolvency Agreements (PIAs) rose almost 29.4 per cent from 51 to 66 in the June quarter. While they remain relatively uncommon, a PIA can provide a negotiated alternative for people with more complex financial affairs,” Chan said.
“Every situation is different and the suitability of any personal insolvency option needs to be carefully assessed.”
Business pressure
While business lending has been surging, insolvency data suggests this is indicative of stress rather than growth.
Economic stress from higher interest rates and rising costs has impacted businesses’ margins, while ATO debt enforcement and regulatory changes such as Payday Super have also put pressure on cash flow.
In May, fellow credit bureau CreditorWatch found payment arrears had climbed to their highest level since January 2020.
Broker Daily has spoken to both lenders and brokers on how cash flow pressures are influencing businesses’ credit behaviour, with demand for working capital facilities increasing alongside a shift from “defensive borrowing to strategic borrowing”.
According to credit reporting bureau Equifax, the proportion of commercial debt paid between 31 and 60 days late increased to 10 per cent in May, up from 7.4 per cent in March.
CreditorWatch also found that July was the third consecutive month in which payment defaults rose, reaching their highest level since September 2025.
The hospitality sector has been hit particularly hard, with one in eight cafes and restaurants closing in the past year, according to CreditorWatch’s data.
Pressures are also more pronounced in regional areas, with close to three-quarters of regional small businesses reporting falling profits, while brokers say many owners are delaying investment and focusing on keeping their businesses afloat.
Tax debt
ATO debt adds another layer of complexity.
A recent audit of the Australian Tax Office found that small business debt increased by $19.4 billion between 2018–19 and 2024–25 – a 118 per cent increase.
Chan also flagged that during the first nine months of 2025–26, the ATO issued more than 62,000 director penalty notices to individual directors and more than 8,000 garnishee notices.
“Tax debt can quickly become personal,” Chan said.
“A DPN can make a director personally liable for certain unpaid company tax and superannuation guarantee debts. Combined with personal guarantees and loans secured against the family home, that can turn a company failure into a personal insolvency months later.
“The rise in business-related personal insolvencies may have further to run, with the consequences of earlier company failures still working their way through.”
[Related: Banks battle for SME lending as margins hit 5-year low]
Want to see more stories from trusted news sources?Make Broker Daily a preferred news source on Google.
