Navigating Small Business Insolvency in Australia: Essential Insights for 2025
- Thyge Trafford-Jones
- Jun 19
- 4 min read
Updated: Jun 27
KEY TAKEAWAYS
Corporate insolvencies in Australia are up 47% year-on-year.
COVID-era debts, ATO crackdowns, and inflation are driving the surge.
Hospitality and construction industries are most at risk.
Small Business Restructuring (SBR) offers a viable path to recovery.
Thyge Trafford Jones (ABC Radio 702) urges SMEs to seek help early.
Introduction: A Crisis Brewing in the Shadows
According to recent ASIC data, over 7,400 Australian companies entered external administration in 2023—an alarming 47% increase from the previous year. Despite headlines focusing on big corporate collapses, it’s small businesses bearing the brunt of the crisis. If current trends continue, Australia is on track to exceed historical records for corporate insolvency by the end of the financial year.
"That really doesn't sound like a stat we want to be associated with," said host Kathryn Robinson, referring to the record surge in insolvencies.
"We hear about the really big ones, but we don't hear about these little ones," she added, highlighting how small businesses are often overlooked in mainstream media coverage of insolvency.
These insights were shared live on ABC Radio Sydney Mornings with Kathryn Robinson, where insolvency expert Thyge Trafford Jones joined the program to shed light on the factors behind this troubling rise—and what businesses can do to survive.
"A lot of these businesses I deal with are good people. They’re not trying to cheat the system. They’re falling into hard times and just need a solution." - Thyge Trafford-Jones
What is Small Business Insolvency?
Definition
Small business insolvency occurs when a business is unable to pay its debts as and when they fall due. It’s a legal status, not just a cashflow problem.
Why It Matters
Ignoring insolvency risks can trigger director penalty notices (DPNs), personal liability, and permanent business closure.
"If a company doesn’t pay its PAYG or superannuation, directors can become personally liable." - Thyge Trafford-Jones
Why Are Insolvencies Rising in 2025?
COVID Legacy Debts
Many businesses are still burdened by tax deferrals, rent liabilities, and unpaid super accrued during pandemic lockdowns.
"We’re still seeing companies suffering from legacy debts they accrued over COVID." - Thyge Trafford-Jones
ATO Debt Crackdowns
The ATO is aggressively pursuing the $35 billion owed by small businesses, issuing more DPNs and initiating recovery action.
Inflation & Cost Pressures
Construction and hospitality have seen input costs skyrocket.
Some SMEs are experiencing cost increases far above CPI.
4. Revenue Drop & Customer Fatigue
Consumer spending has dropped, compounding revenue stress for already-fragile businesses.
"Some businesses are facing cost increases that exceed inflation over the past two or three years." - Thyge Trafford-Jones
Which Industries Are Most At Risk?
Hospitality
Rising food, labour, and rent costs.
Decline in discretionary spending.
Construction
Cost blowouts in materials and labour.
Razor-thin margins and stalled payments.
Professional Services
Overreliance on a few clients.
Vulnerability to delayed invoices and cashflow shocks.
"Feedback is saying SMEs are one shock away from collapse." - Thyge Trafford-Jones
What Happens When an Insolvency Expert Steps In?
Step-by-Step:
Assessment:
Historical financials reviewed to understand causes of distress.
Strategy
Options outlined, including informal workouts, SBR, or liquidation.
Support
Expert guides the director through legal and financial implications.
"The first thing I do is get background from the director, then offer new strategies." - Thyge Trafford-Jones
Small Business Restructuring (SBR): A Lifeline
What Is SBR?
A streamlined process introduced in January 2021 allowing SMEs to restructure debts while retaining control of the business.
SBR Key Features | SBR Benefits |
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"SBR allows a business to wipe or restructure its debts and trade forward with a clean slate." - Thyge Trafford-Jones
What Should Business Owners Do Now?
Don’t Delay:
The earlier you act, the more options you have.
Know the Signs:
Missed BAS/super payments
Supplier payment delays
ATO letters of demand or DPNs
Seek Help:
Contact a registered insolvency expert.
Don’t wait for legal action or bank foreclosure.
"Reach out. Get help. There are solutions." - Thyge Trafford-Jones
FAQs
What is a DPN?
A Director Penalty Notice (DPN) is issued by the ATO. It can make company directors personally liable for unpaid PAYG and super.
How long does an SBR process take?
Typically 35-60 days, depending on creditor engagement.
Can I keep trading during a restructure?
Yes, SBR allows directors to continue operating the business.
Is SBR better than liquidation?
SBR aims to preserve the business. Liquidation is the last resort when survival isn't viable.
Sources & Citations
ABC Radio Sydney 702 interview with Thyge Trafford Jones, 2025
About the Author
Thyge Trafford Jones is a registered liquidator and restructuring expert with over 20 years' experience. He is the founder of TTJ Advisory and a regular contributor to industry media on the topic of insolvency, restructuring, and director liability.
If your business is under pressure, don’t wait for the ATO to act first. Contact TTJ Advisory for a confidential discussion about your options. A restructure might be all it takes to save your business.
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