Australia saw a rise in personal insolvencies for the third consecutive year, according to the Australian Financial Security Authority (AFSA). In the 2024-25 financial year, there were 12,257 cases, marking a 5.3 per cent increase from the previous year. While figures remain below pre-COVID-19 levels, the upward trend indicates ongoing financial strain for households and small businesses across the country. AFSA is a government agency that administers bankruptcy and personal property securities laws. It also regulates debt agreements and promotes financial literacy.
The primary driver of insolvency was excessive borrowing, accounting for 37.3 per cent of cases. Unemployment and business failures were also significant contributing factors. Data shows that nearly half of all debtors owed less than $50,000, suggesting the insolvency system is serving as a safety net for those with relatively smaller debts. However, a small number of high-debt individuals are increasingly influencing the overall debt landscape.
Business-related personal insolvencies represented 28.8 per cent of total cases but comprised 78.8 per cent of new debt. These were largely concentrated in the construction and other services sectors. AFSA chief executive Tim Beresford noted the impact of high-debt outliers, stating that just 79 individuals with debts exceeding $10 million accounted for $3.9 billion, or 59.3 per cent of all new liabilities in 2024-25.
Buy now, pay later (BNPL) debts are also contributing to financial distress, with nearly half of all new debtors holding such debts. Among debtors aged 29 or younger, this figure rises to 65.2 per cent. AFSA anticipates personal insolvencies to continue rising, projecting approximately 13,000 cases in 2025-26 and 13,750 in 2026-27, fuelled by persistent cost-of-living pressures and economic uncertainties.
