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Important

If business feels harder right now, you are not imagining it. Insolvencies are rising, and the ATO is behind a lot of the tipping point moments. Here is what you need to know and what to do about it.

If business feels harder right now, you are not imagining it.

If you are a business owner in Australia, chances are you have had at least one of these moments recently:

• “We are turning over decent money… so why does it feel so tight?”
• “Costs keep creeping up, but customers are pushing back on price.”
• “I am working harder than ever, and the cash still disappears.”

That is the reality of 2025 rolling into 2026.

And here is the part people are not talking about enough:

Insolvencies are rising, and the ATO is behind a lot of the ‘tipping point’ moments.

Not always the original cause. But very often, the creditor that turns a messy situation into a collapse.

The Stats Are Clear: Insolvencies Have Lifted Sharply

ASIC’s published insolvency data shows:

14,722 companies	entered external administration for the first time in FY2024–25, up 33.2% from FY2023–24

That is not a “small increase”. That is a meaningful jump.

And it matters because external administration is not a slap on the wrist. It is:

• voluntary administration
• liquidation
• receivership
• restructuring pathways where the business is already under severe stress

This is where I will be transparent: ASIC’s cleanest headline reporting is by financial year, not neat calendar half-years. So a perfect “Jan–Jun 2025 vs Jul–Dec 2025” comparison is not always served up in one tidy table.

What we can say (with confidence) is:

• FY2024–25 was materially higher than the prior year (33% up).
• The first quarter of FY2025–26 (Jul–Sep 2025) recorded 3,556 external administrations, which is still an elevated run-rate (only slightly down on the same quarter the year before).

Practical takeaway: the pressure is not easing in any meaningful way.

The Usual Suspects Are Still Doing Damage

Even if you do not follow macro headlines, you feel the squeeze in day-to-day trading:

• Interest rates are not providing relief.
• Costs have not eased enough: wages, insurance, rent, utilities, inputs.
• Consumers are tighter, so volume is harder and margins get squeezed.

This is the environment where “small” problems become lethal quickly:

• one slow month
• one large customer paying late
• one unexpected bill
• one quarter where BAS, PAYG, super and payroll tax all line up at once

The Part Many Business Owners Miss: The ATO Effect

Here is the uncomfortable truth:

The ATO is a creditor in most insolvencies.

The RBA has reported that:

• Over 80% of companies entering insolvency have known tax liabilities.
• Since 2022, the share of insolvent firms entering external administration with tax liabilities above $250,000 has risen by more than 10 percentage points.

Now combine that with the ATO’s own position:

The ATO is actively focused on reducing unpaid tax and bringing down the $50 billion collectable debt book, with commentary noting major portions relate to activity statement debt and small business.

Put simply: If you are already behind, this is a terrible environment to be hoping things “sort themselves out”.

“Ruthless” is not the wrong word. Business owners often assume ATO pressure looks like one scary letter.

In reality, what I see is more like a snowball:

• You miss a payment (or you lodge late).
• The ATO escalates faster than it used to.
• You get distracted and reactive instead of running the business.
• Suppliers tighten terms.
• Finance renewals get harder.
• Credit agencies and other parties become less forgiving.

Even if the ATO does not technically “cause” the business to fail, it can absolutely trigger the timing of the failure.

My Call for 2026: More ATO-Driven Collapses

This is the forward-looking piece.

If the ATO stays on this path (and all signs say it will), then 2026 will likely bring:

• more forced discipline around lodgement and payment
• more pressure on businesses that have been “rolling debt”
• more insolvencies where the ATO is the final straw

Not because the ATO is evil. Because the ATO has a job to do, and the debt book is enormous.

What to Do If You Are Behind: A Practical Six-Month Plan

This is the bit that matters.

If you are already behind, your goal is simple: Get back in control before someone else takes control for you.

Here are the practical moves.

1. Implement Cash Flow Discipline (Not Gut Feel)

You need a system that tells you, weekly:

• what cash is coming in
• what must be paid
• what the next four weeks look like

A monthly P&L is useful, but it is too slow when conditions are tight.

2. Quarantine ATO Money (Mentally and Physically)

Treat these as money you are holding for someone else:

• GST
• PAYG withholding
• superannuation (your staff)
• payroll tax (if relevant)

Real-world example: If your bank balance is $120,000 but $45,000 of that is GST/PAYG/super, you do not have $120,000. You have $75,000 and a ticking clock.

3. Increase Reporting and Payment Frequency by Choice

If quarterly hits are smashing you, you need to stop pretending next quarter will magically be easier.

Consider:

• moving BAS to monthly (where appropriate)
• treating PAYG withholding like it is “paid as you go”, not “paid when I remember”
• paying super more frequently now, because the system is moving toward higher frequency anyway (including the scheduled move to payday super from July 2026)

The point is not perfection. The point is avoiding a single quarterly hit becoming the knockout punch.

4. Treat ATO Letters as Warnings, Not Admin Noise

Deal with issues while you still have options:

• respond early
• lodge what is missing
• get a plan in place
• keep communication clean and consistent

Once the ATO thinks you are disengaged, the tone changes quickly.

5. Do Not Wait for the ATO to Force Your Hand

Engage early:

• talk to your accountant
• talk to the ATO (or the relevant agency)
• map out what you can pay, and when
• stop the “head in the sand” cycle

The earlier you act, the more levers you still have.

A Quick Note for Employees: Watch Super Like a Hawk

If you are an employee and you are sensing stress at your workplace:

• keep an eye on whether super is being paid on time

It is often one of the earliest indicators that cash is tight.

That does not mean the business is doomed. But it is a sign that the business owner needs to get serious quickly.

The Wrap-Up: Survive by Getting on the Front Foot Early

Business is hard right now.

The businesses that survive are usually not the ones with the fanciest strategy deck.

They are the ones with:

• tight numbers
• disciplined cash flow
• quarantined tax money
• early engagement with the ATO
• quick action when warning signs show up

If you want one practical takeaway: Do a simple cash flow and compliance review this week, not “soon”.

Disclaimer: This article provides general information only and does not take into account your personal circumstances. It is not financial or tax advice. You should seek independent advice from a qualified professional before making decisions about tax, legal or financial planning matters, along with loan structures or entity structure.