AVA Advisory insight report

Corporate insolvency & credit risk trends

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Australian businesses are facing a shifting economic environment in July 2025. While the RBA held the cash rate steady at 3.85% in its July decision citing early signs of cooling inflation, real business conditions remain under pressure. Energy costs, tax enforcement, and lingering consumer uncertainty continue to dampen SME resilience.

According to NAB’s July Business Conditions Survey, business confidence fell for the second consecutive month, and capacity utilisation dropped below its long-term average for the first time since late 2022. In parallel, the ABS has flagged a rise in business exits across hospitality, personal services, and logistics.

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Insolvency overview

• 1,504 companies entered external administration in June 2025 (ASIC, released mid-July), up 12% MoM and 31% YoY
• NSW and VIC continue to account for the highest number of appointments
• Construction and accommodation & food services remain dominant drivers of insolvency volume
• CreditorWatch’s July data reports a further 1.7% rise in 60+ day trade payment defaults, led by retail and health-related services
• Liquidations outpaced voluntary administrations by a ratio of 4:1, a signal that fewer businesses are successfully restructuring

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Sector in focus
Logistics & transport

For the first time in 2025, transport and warehousing appeared in the top five sectors by insolvency volume. Fuel price volatility, industrial action, and tighter trade credit are eroding margins, especially for subcontractors.

Key drivers:

• Rising diesel costs post-fuel excise indexation in July
• Late payment bottlenecks from retail and FMCG clients
• Disruptions from eastern states’ flooding events

Risk flag: several medium-sized freight companies in VIC and QLD entered administration this month. Suppliers should closely monitor receivables exposure in the third-party logistics (3PL) and courier segments.

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ATO & policy update

DPN enforcement up 18% YoY (July snapshot)
ATO debt collection remains in high gear, particularly post-1 July, now that interest on unpaid debts is no longer tax deductible. AVA has observed increased inbound advisory from clients who received DPNs for GST and PAYGW arrears in the first two weeks of July.

Temporary relief programs fully wound down
Businesses that previously accessed low-interest COVID-related payment deferrals are now receiving final demand notices. Several SME directors flagged the abrupt return to full payment obligations as a financial shock.

ATO's new “High-Risk Director” alerts trial
Launched quietly in July, the ATO is testing automated alerts to financial institutions for directors with multiple entities showing PAYG debt over $50,000, indicating broader policy coordination with lenders and external administrators.

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Legislative developments

ASIC regulatory focus shifting toward creditor conduct
Following the PJC's June findings, July saw ASIC signal a new review of creditor behaviour during restructures, including the use of aggressive proof-of-debt practices and coercive payment plans. A consultation paper is expected by September.

Bankruptcy law review opens to public comment
The Attorney-General’s department has opened a July–August consultation round on consumer bankruptcy reforms, including a proposed change to reduce default bankruptcy terms from 3 years to 1 year, potentially increasing informal business wind-downs through personal bankruptcy.

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Early warning indicators

Based on July’s activity across AVA’s advisory cases, these signals were most associated with insolvency appointments:

• Unexpected appointment of external accountants/bookkeepers
• Lease non-renewals or early exits flagged to landlords
• Sudden shift in trade terms (e.g. from 30 to 7-day payment cycles requested by counterparties)
• Appearance of new short-term financing providers on credit checks (often alternative lenders)

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Outlook for August/September

• Expect insolvency volumes to peak in September, traditionally a seasonal high for formal appointments
• Retailers and food operators exiting FY25 without securing holiday stock finance may pre-emptively enter voluntary administration
• RBA likely to hold rates again in August, giving temporary reprieve but not reversing broader credit tightening
• Policy focus will increasingly turn to insolvency system reform, with stakeholder responses to recent federal reviews due by Q4

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Credit risk recommendations

• Increase monitoring of transport/logistics, fitness/wellness operators, and child care services
• Pay special attention to clients issuing multiple credit applications within 60 days
• Prepare for August demand drops in seasonal businesses (esp. food, retail, tourism)
• Conduct cash flow stress testing on large accounts tied to sectors with flood exposure (NSW North Coast, SE QLD)

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