Company collapses increased by 14% in March as figures near a 10-year high, with accountants claiming the figures will remain high amid challenging business conditions.
According to figures released by the Australian Securities and Investments Commission, company collapses increased from 852 in February to 968 in March.
The increase is the second highest level on record for March – beaten only by the March figure of 1,095 in 2009 – and is up 7% compared with the same time last year.
In Western Australia, total company collapses are at an all-time high of 72, putting it just above the second highest levels reached in May 2009.
Company failures due to creditors winding up applications hit 451 in March, up 27% since March last year, while voluntary administrations hit a 10-year low for March at 129.
Chartered accounting firm Taylor Woodings said in a report the decrease in voluntary administrations is the result of an earlier change to the Corporations Act, which streamlined the creditor voluntary liquidation process.
“We consider this decline, coupled with an increase in creditor voluntary wind-ups, is due to company directors utilising this new voluntary winding up process to ‘clean up’ companies and company structures,” the company said.
The accounting industry expects collapses to rise again this year as the economy’s slow-moving recovery has left some industries still struggling.
According to Peter Strong, executive director of the Council of Small Business of Australia, the latest insolvency figures indicate that small business is in crisis.
Strong says small business owners are “gob-smacked” over the severity of the issue, arguing that business protection is no longer a priority.
Accountants say a tougher approach by the Australian Taxation Office, combined with increasing cost pressures on businesses, are to blame for small businesses’ financial woes.
PKF corporate recovery partner Ken Whittingham says the Tax Office has issued increasing numbers of director penalty notices to small and large businesses in almost every industry.
“The notices give businesses just 14 days to settle their debts or leave them insolvent,” Whittingham says.
According to Taylor Woodings, insolvency figures will remain high in April as business conditions remain challenging, particularly for SMEs.
“In the medium-term, we expect insolvencies to remain at these historically high levels, particularly if official interest rates rise,” the company says.
“As the RBA signaled this week, future increases are likely due to the expected continued growth in inflation, further impacting consumer confidence.”
Meanwhile, the latest Dun & Bradstreet business expectations survey shows expectations are heading into negative territory, with sales expectations down nine points to an index of five.
The survey reveals profits expectations have fallen 15 points to an index of -7, while employment expectations are down six points to -3.
Dun & Bradstreet chief executive Christine Christian says the business outlook is likely to remain uncertain as consumers continue to hold on their cash, and businesses await the outcome of the Gillard Government’s first budget.