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What Australia’s record low insolvency and bankruptcy figures mean for businesses and individuals in 2021

The long-term health implications of contracting COVID-19 are still unknown, but it’s clear that the impact of the virus can be felt much longer than the initial illness. Many have suffered for months with ‘long-COVID’, while others have still not recovered their sense of taste and smell, even if they were otherwise symptomless in March. It’s a similar case for the economy and Australian business owners. Some suffered a short, sharp shock at the start of the pandemic – especially businesses in hospitality and travel.

Others have suffered slowly over time, experiencing lost income and an inability to operate as usual. For some businesses that weren’t hit directly by the pandemic, they are still hurting due to the depth and breadth of its impact. Trading in a more cautious financial market makes it far harder to find new customers, grow a business or secure funding. Thankfully the Australian government has intervened in several distinct ways.

In tandem with strict public restrictions to prevent the spread of the virus, the Australian government has introduced a range of measures to ensure businesses negatively impacted can stay afloat. Schemes like JobKeeper and the Cashflow Boost have successfully propped up businesses and encouraged employers not to make redundancies. Meanwhile changes to bankruptcy laws have extended the temporary debt protection period, increased the time individuals have to reply to bankruptcy notices and increased the minimum amount of debt that can trigger bankruptcy from $5,000 to $20,000. All these measures have worked remarkably well, but they also skew the economic impact of the pandemic and mask underlying issues. Their success also raises an intriguing question…

How many Australian businesses are still operational that would’ve been insolvent in a normal year?

Float analysed the latest Australian Securities and Investment Commission (ASIC) and Australian Financial Security Authority (AFSA) figures on business and personal insolvencies (released in November 2020). We wanted to answer this question and better understand how many insolvent businesses and persons we can expect to see in 2021. Our figures are based on data trends continuing to the end of the year, compared to ASIC and AFSA data from 2007-2019. However, they may only be a conservative estimate since 2020 was such an atypical year. The actual numbers could be far higher.

It is important to note that the government recently announced a package of reforms directed at streamlining insolvency processes for small business. However, many argue that the new measures coming into force on 1st Jan 2021 are not as robust as the first round of stimulus measures.

The number of zombie businesses

ASIC has reported record low business bankruptcy figures in 2020, with a staggeringly low 946 business bankruptcies in July, August and September 2020 – compared to a quarterly average of 2,367 in previous years.

Further to this 60% decrease, March and June 2020 quarters were also down 6% and 44% respectively compared to the 2015-19 average.

We believe that many businesses are being propped up by Government support that would have otherwise entered into external administration, or are in the lengthy process of doing so. Based on the difference between 2020 and 2019 figures, we believe the number of unviable businesses could easily be ~2,300 and could rise to more than 3,400 by the end of 2020.

AFSA has reported record low insolvency figures in 2020, with a staggeringly low 672 business bankruptcies in July, August and September 2020 – compared to a Q3 average of 1,663 in previous years. Q1 and Q2 2020 figures also down 19% and 45% respectively compared to 2019.

As these interactive graphs show, all Australian states and territories saw a significant decline in insolvencies in January-October 2020 vs the same time period in 2019.

The trend is even more stark when viewing the latest quarterly results side-by-side. When comparing July, August and September 2020 vs the same period in 2019, virtually the whole of Australia turns green.

As for what this means for the potential number of zombie businesses in each state, New South Wales and Victoria saw the biggest numerical decrease in insolvencies in 2020 compared to 2019. Therefore it is likely that they have the highest number of unviable businesses today. However, as two of Australia’s biggest economic hubs, this was always to be expected.

Instead, it is more interesting to look at insolvencies in 2020 vs 2019 as a YoY percentage change. Across all regions, Australia saw a 37% YoY decrease in businesses entering into external administration. Three states recorded figures below the national average of 37%, meaning they saw insolvencies more similar to 2019 levels compared to other regions. Among them is Victoria (34%), which has recorded the most COVID cases in the country and introduced the strictest lockdown restrictions. This suggests that government interventions designed to help businesses had reduced impact compared to regions like Western Australia.

It is worth noting the smaller sample size for ACT, NT and Tas, which may account for the big variation – take these figures with a pinch of salt.

Personal insolvencies

New statistics from AFSA show personal insolvencies rather than business insolvencies, but we see a similar pattern to the ASIC data. Personal insolvencies for 2020 are way down, especially the latest quarterly data.

6,100 personal insolvencies were recorded in the September quarter 2019, 4,440 people in business and 1,660 people not in business (or not stated). This figure is down 51% in the same quarter of 2020 which saw just 2,988 personal insolvencies.

The AFSA data supports the ASIC regional breakdown and the notion that government intervention had a less telling impact on Victorian businesses and individuals. Victoria saw personal insolvencies most similar to 2019 levels last quarter. Of combined Q3 personal insolvencies in Victoria, 35% occurred in 2020 and 65% occurred in 2019. For Queensland, the figures are 31% and 69% respectively. Although there are only a few percentage points between Victoria and other regions, it underscores the impact of COVID in the region vs elsewhere. If the trend were to continue over multiple quarters, it would be a serious cause for concern to the local economy.


Unfortunately, many Australian businesses will not survive the pandemic long-term and we expect that there will be a significant spike in insolvencies in 2021. The Government must scale back on financial interventions as slowly and carefully as possible to avoid a wave of zombie firms declaring bankruptcy at the same time – which could be devastating for a recovering economy.

We are also encouraging businesses to remain cautious with their spending even as the country heads into summer and records fewer COVID-19 cases. Even if they think they see the light at the end of the tunnel, there’s still a long way to go. They need to get a tight grip on their cash flow and prepare for as many possible future scenarios as possible. Making decisions based on the facts, using real world financial data, is essential for business owners right now, regardless of how optimistic they may feel at the moment.

Float helps businesses forecast their cash flow, predict cash gaps and plan for the future. We have helped thousands of businesses stay afloat during the COVID-19 pandemic, and are offering a free two-week trial of Float to help more businesses start cash flow forecasting.

All figures accurate as of 5th November 2020. Float analysed publicly available data released by The Australian Securities and Investment Commission (monthly insolvency statistics) and The Australian Financial Security Authority (business and non-business related personal insolvency statistics). The figures are available to download on the ASIC website as well as the website

Dylan Burgess

Partner Relationship Manager