Corporate Insolvencies Decrease
CORPORATE insolvencies have fallen for the third financial year in a row, with mining one of the few industries where company failures are increasing.
But insolvency practitioners say the statistics are a sign of a bottomed-out economy, not a healthy one, and they point to a recent rise in wind-up notices as evidence of a federal government push to reclaim tax debts.
The insolvency picture comes from new figures published by the Australian Securities and Investments Commission, which tracks the numbers of insolvency appointments.
In the year to June 30, the ASIC figures show 9177 companies going into external administration, down from 9822 in the 2013-14 financial year, 10,748 in 2012-13 and 10,757 in 2011-12.
Numbers fell in 21 of 25 industry categories, with mining the only substantial increase, rising from 146 insolvencies in 2013-14 to 240 in 2014-15.
Newcastle insolvency specialist James Shaw, of Shaw Gidley, said the numbers of corporate insolvencies had fallen substantially, both nationally and in the Hunter Region.
“Numbers tend to rise when the economy is slowing, and companies find their incomes falling below their costs, and on the way up, when people get a bit too ‘entrepreneurial’ and get ahead of themselves,” Mr Shaw said.
“In a trough, as we are now, things seem to even out a bit, and it may be that low interest rates are helping companies to manage their debts when incomes are falling.”
Mr Shaw said his firm had handled a few mining-related insolvencies in the past 18 months.
One of these companies was Pacific Carbon, a Kooragang Island business that went into voluntary administration and then receivership midway through last year.
Pacific Carbon sold a coke-type char product used in specialist metal production, but problems in sourcing the right sort of coal led to financial difficulties.
Former director Trevor Welsh said he had moved on since the loss of the company, but feared it would take a long time for the Australian coal industry to return to its previous profitability.
Sydney insolvency specialist Jamieson Louttit said figures collected by his firm – which were “two or three months ahead of the ASIC figures” – showed a substantial spike in insolvencies, thanks to the Australian Taxation Office.
Mr Louttit, of Jamieson Louttit and Associates, said the tax office once only pursued court action against tax debts where it was economical to do so.
It was now taking legal action on debts of as little as $30,000.
Historically, the tax office issued about 90 wind-up notices a month, but had averaged about 500 a month since its push began in May.
“The tax office shows no leniency in its arrangements and a short-term push for revenue will only cause long-term problems as small businesses are pushed under,” Mr Louttit said.
The tax office said it was not cracking down on small business but was taking a “balanced” approach to ensuring all businesses met their tax obligations.