Insolvencies to rise against with 2009 tax statements

Experts are bracing for a jump in the number of insolvency cases over the next two months as companies prepare to submit their first Business Activity Statement for 2009.

New figures show the number of insolvency cases has hit record levels in the last few months.

New data from turnaround specialists Restructuring Works shows the number of companies entering an administration, liquidation or receivership jumped to 8898 for the 12 months ending November, 2008.

This is a 25% increase on the five-year average and the highest level of insolvencies since 1999.

Meanwhile, research from insolvency firm SV Partners reveals court-ordered liquidations rose by almost 7% last year. Liquidations in Queensland jumped by 20.9% while Victorian liquidations increased by 9.7%.

Most insolvency experts are predicting another sharp rise in cases this year as economic conditions continue to deteriorate.

A potential trigger point could come in February and March as SMEs prepare to submit their first BAS statements.

The Australian Taxation Office is often the largest creditor for many SMEs.

Sue Prestney, principal of MGI Boyd Accountants, says the lodging of BAS statements could be “the straw to break the camel’s back” for some companies.

“If businesses find they have to lodge it and they don’t have enough money to pay it, and they realise they’re insolvent, that might trigger administration and so on.”

“You may also find the ATO comes chasing them a few weeks after – the tax office might seek administration then also.”

“I think insolvencies will rise this year,” she says. “Lower consumer demand hasn’t really come through yet into insolvencies, so there’s a lot to come.”