Insolvencies jump as advisers gauge a return to normal

Australia’s corporate insolvencies jumped sharply again in October, reversing the brief late-winter reprieve and pushing 2025 back near record territory, according to the latest Alares Monthly Credit Risk Insights. The rise has reopened a central question: are we inching back toward pre-pandemic norms, or hovering at a higher-but-unstable plateau?

Right now, the evidence is mixed. Some indicators point to gradual normalisation, while others – particularly debt enforcement activity – keep totals elevated.

A spike, but not yet a trend

October’s lift took appointments back toward all-time monthly highs, but 2025 overall has been choppy rather than directional: softening in late winter, a rebound in October, and no convincing trendline up or down. Insolvencies remain above 2016–2019 levels, but there is no decisive push higher.

Small Business Restructuring (SBR) appointments also rose after several months of decline – a move that may reflect timing and case mix as much as shifts in business health.

Key drivers – and some signs of resilience

1. ATO enforcement still dominant

• Tens of billions in tax debt outstanding.
• More than 30,000 businesses on public disclosure.
• Around 400-500 new disclosures to collection agencies each week.
• Court activity remains elevated.

This continues to push distressed firms into formal processes more quickly. If ATO intensity stabilises, pressure may ease at the margin.

2. Big-four banks stepping back

Court recoveries remain below 2024 peaks. With arrears manageable, major bank behaviour has become a stabiliser rather than an accelerant of distress.

3. Non-bank lenders still assertive

Non-banks and second-tier lenders are increasing enforcement, creating pockets of pressure, though not yet reshaping the full landscape.

4. Wind-up applications still high

Applications remain elevated but volatile – another sign of range-bound movement rather than a runaway trend.

5. A counterweight: SME conditions improving

The NAB SME Survey (Q3 2025) shows a more resilient operating environment than insolvency volumes alone suggest. Key findings include:

• SME business conditions jumped 7pts to +2, positive for the first time in more than a year.
• Confidence rose for the fourth straight quarter, reaching its highest level since 2022.
• Strongest gains were in property, finance and manufacturing; NSW and Victoria reached their best levels since 2023.
• Forward orders, cashflow and capex intentions improved, and capacity utilisation returned above its long-run average.

The smallest SMEs remain under pressure – their conditions fell to minus-7; however, the broader improvement indicates that parts of the sector are stabilising even as insolvency volumes remain high.

6. Personal insolvency rising, but still low

AFSA data remains well below long-run averages, signalling partial normalisation rather than deterioration.

Are we returning to historical norms?

It’s still unclear, but more possible than earlier in the year. The insolvency environment looks range-bound, with spikes like October’s but no sustained breakout. Meanwhile, the NAB SME Survey points to improving conditions, higher confidence and better forward indicators – signs that business activity for many SMEs is not deteriorating despite elevated enforcement settings.

If ATO pressure moderates and major banks maintain their cautious stance, 2026 could see insolvency volumes drift closer to historical norms. Conversely, persistent tax-debt enforcement and assertive non-bank recovery activity may keep numbers elevated.

Bottom line: October’s rise is a watchpoint, not a verdict. The next few months will show whether the SME-side improvement can soften the elevated insolvency trend, or whether enforcement settings keep Australia on a higher plateau.