Businesses in Australia are currently experiencing higher levels of debt than they were pre-pandemic. According to the ATO, many SME are carrying six-figure debts, and have been surprised to be issued with a director penalty notice—even though they were already making payments. During the pandemic, the ATO eased debt collection activities. In April of this year, they re-commenced debt collection, sending out thousands of warning letters.

Business insolvencies are now back to pre-pandemic levels with the ATO sending out 120 director penalty notices a day as it continues to increase debt collection activities. July recorded 674 businesses being wound up or entering administration, which is comparable to figures for 2019–20.

Stimulus from the Government during the pandemic saw the number of insolvencies fall to around half of their current levels. With the Government assistance now gone, many business owners can no longer ignore serious warning signs that their business is in trouble.

Businesses currently experiencing the highest levels of debt and insolvencies are those in industries that typically rely on discretionary spending, such as arts and recreation, information, media and telecommunications, and hospitality services.

If you have received a director penalty notice or have serious concerns about the future of your business, get in touch with your advisor.