Jirsch Sutherland
Key Facts:
- Personal insolvencies in Australia surged 13.1 per cent in the June quarter of 2026 compared with the same period the previous year, with 3,596 Australians entering personal insolvency, according to new AFSA figures.
- Sustained high interest rates, cooling property prices, and rising unemployment are identified as the key pressures driving insolvencies higher, with traditional escape routes such as refinancing and accessing home equity becoming increasingly difficult.
- Business-related personal insolvencies rose 17.8 per cent in the June quarter to 1,093, with insolvency firm Jirsch Sutherland warning that the personal consequences of company failures typically emerge nine to twelve months after corporate collapses.
- The ATO is intensifying enforcement pressure, issuing more than 62,000 Director Penalty Notices and more than 8,000 garnishee notices in the first nine months of 2025-26.
- Jirsch Sutherland Principal Michael Chan cautions that interest rate relief is not guaranteed, and urges financially vulnerable Australians to seek help early and explore all available options.
New Australian Financial Security Authority (AFSA) figures reveal that personal insolvencies surged 13.1 per cent in the June quarter 2026 compared to the same period last year, signalling a growing risk of bankruptcy.
Sustained high interest rates, cooling property prices and rising unemployment are creating a challenging economic backdrop that could drive personal insolvencies higher across Australia, according to business recovery and insolvency firm Jirsch Sutherland.
The warning follows new Australian Financial Security Authority (AFSA) figures showing personal insolvencies surged 13.1 per cent in the June quarter 2026 compared with the same period last year. Almost a third were business-related, with those cases rising 17.8 per cent to 1,093.
AFSA's June quarter figures show:
- 3,596 Australians entered personal insolvency, up from 3,179 a year earlier
- Bankruptcies rose 9.6 per cent to 1,950
- People living in capital cities entered personal insolvency at a higher rate than those in regional areas in every state except Tasmania
- NSW recorded 1,085 cases, followed by QLD (944), Victoria (787), WA (309), SA (197), Tasmania (84), the ACT (51) and the NT (29), with another 110 classified by AFSA as "Other".
Across FY26, personal insolvencies rose 9.9 per cent to 13,465.
"Australians are running out of financial buffers just as economic conditions harden," says Jirsch Sutherland Principal Michael Chan. "This trio of pressures is hitting as traditional escape routes are narrowing. Tighter lending conditions are making it harder to refinance or consolidate debt, while falling property values can reduce the equity available to homeowners.
"Many people have already drawn down their savings, increased their credit-card debt, or borrowed from family to cope with prolonged high-interest payments, stay afloat, and keep businesses operating. For someone living close to the edge, one further financial shock can be enough to push them into insolvency."
That risk is growing as unemployment rises, reaching 4.5 per cent in July. AFSA has previously warned that personal insolvencies could rise faster if unemployment increased more than expected. It has also identified low unemployment as an important reason why insolvencies remained below pre-COVID levels.
"That warning is becoming more relevant," Chan says. "Employment has been one of the strongest barriers against bankruptcy, but that buffer is weakening."
The cash rate remains at 4.35 per cent, and minutes from the RBA's August meeting show further tightening remains possible if upside inflation risks materialise. The RBA says financial conditions are somewhat restrictive, while national housing prices have fallen 1.6 per cent from their March peak and demand for new housing loans has declined noticeably.
"For financially vulnerable Australians, the critical point is that interest-rate relief isn't guaranteed," Chan says. "Borrowing costs are already elevated and another increase remains possible. At the same time, falling property values and tighter lending conditions are reducing the options available to refinance or access equity."
Business failures carry a personal cost
Business-related personal insolvencies climbed 14.4 per cent to 4,046 during 2025-26, while the June-quarter figure rose 17.8 per cent to 1,093.
"The personal consequences of a company failure often emerge later; personal insolvencies have historically followed corporate insolvencies by nine to 12 months," says Chan. "Corporate insolvency doesn't necessarily end when the company closes. For directors, the impact can surface months later through personal guarantees, loans secured against the family home and outstanding tax liabilities."
ATO enforcement is adding to the pressure. During the first nine months of 2025-26, the ATO issued more than 62,000 Director Penalty Notices to individual directors and more than 8,000 garnishee notices.
"Tax debt can quickly become personal," Chan says. "A DPN can make a director personally liable for certain unpaid company tax and superannuation guarantee debts. Combined with personal guarantees and loans secured against the family home, that can turn a company failure into a personal insolvency months later.
"The rise in business-related personal insolvencies may have further to run, with the consequences of earlier company failures still working their way through."
Chan adds that it's important to remember that bankruptcy isn't the only option.
"For example, Personal Insolvency Agreements (PIAs) rose almost 29.4 per cent from 51 to 66 in the June quarter. While they remain relatively uncommon, a PIA can provide a negotiated alternative for people with more complex financial affairs," he says. "Every situation is different and the suitability of any personal insolvency option needs to be carefully assessed."
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