Key findings:
- There were 11,644 new personal insolvencies in 2023-24, an increase of 17.3% from the previous year. This remains well below the ten-year average of 21,252.
- AFSA has forecast personal insolvencies to rise by 15% to 13,400 in 2024–25 and by a further 12% to 14,950 in 2025–26.
- While just over a quarter (25.1%) of personal insolvencies were business-related, they accounted for 75% of the personal insolvency system’s total debt ($17.3 billion), with a total value of $13.2 billion in liabilities.
- Debtors with low liabilities continue to represent a significant proportion of new personal insolvencies in 2023-24, with 49% of debtors having liabilities of less than $50,000.
A report released today by the Australian Financial Security Authority (AFSA), reveals that debtors with small savings buffers are the most vulnerable to insolvency through challenging economic conditions and personal insolvencies continuing to rise.
The report shows that AFSA is expecting annual personal insolvency volumes to rise moderately over the next two years. The report highlights that ongoing cost-of-living pressures have had an uneven effect on Australian households.
The proportion of debtors with less than $50,000 in liabilities continues to represent a large part of the personal insolvency system, with 49% of debtors having less than $50,000 in liabilities and just over a quarter of debtors had over $100,000 in liabilities.
AFSA’s Chief Executive and Inspector-General in Bankruptcy, Tim Beresford, said: ‘“With escalating financial and economic pressures post-COVID, households and businesses are now under the highest level of mortgage stress and cashflow constraints since the GFC. Inflation, increasing interest rates and macroeconomic uncertainty are linked to increasing insolvency levels, however, low unemployment means insolvencies remain well below the 10-year average and their pre-COVID levels.”
“Higher levels of financial stress can increase the prevalence of predatory practices, fraud, and untrustworthy advisors, seeking to take advantage of those in vulnerable financial positions. AFSA is taking a more proactive education, compliance and enforcement posture in this environment to protect against system misuse.”
“It is important to acknowledge that people may enter insolvency for many reasons, including a variety of health, social and economic factors. Our message to those in financial distress, especially those who are young renters, first home buyers or have small savings buffers, is to come to AFSA as a first port of call, so we can connect you to the support you need.”
“We are changing the way we look at vulnerability - understanding that it is not just financial and can include a wide range of other stresses, including mental and physical health issues, addictions, and family and domestic violence. People exposed to these stressors may be more vulnerable to harm, exploitation, or other detriments which has a direct impact on their ability to engage with our regulatory systems.”
“We are combatting this by establishing a dedicated Education and Outreach function to focus on education targeted at vulnerable people, improving our Google advertising strategy to increase access to information for people conducting internet searches on these matters, and working with consumer advocates to better understand those struggling with vulnerability due to gambling addictions.”
Debtor characteristics have not changed significantly over time with New South Wales, Queensland, and Victoria making up the three states with the highest insolvencies at 3,447, 2,926, and 2,254 respectively. The State of Personal Insolvency System Report found that in 2023-24 most personal insolvencies were incurred by males (55.4%), with females making up 42.3%. Large metropolitan areas had higher rates of personal insolvency than regional areas. Sydney and Melbourne had the most and second most personal insolvencies, with 17.3% (2,019 personal insolvencies) and 13.6% (1,583 personal insolvencies) respectively.
Read the report State of the Personal Insolvency System.
About AFSA
The Australian Financial Security Authority’s (AFSA) vision is a strong credit system for Australia. AFSA is responsible for administering Australia’s personal insolvency and personal property securities systems and managing criminal assets. The organisation’s role is to maintain confidence in these systems which provide Australian consumers and businesses with tools to manage financial risk, contribute to investor and business confidence, and provide enhanced access to finance within the economy. AFSA is developing as a visible, modern and contemporary regulator through education, compliance and enforcement.
