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As we move firmly into 2026, it is worth pausing and looking at the numbers.
The Australian Financial Security Authority recently released its provisional statistics for December 2025, showing an increase in personal insolvencies compared to the previous year. That includes bankruptcies, debt agreements and personal insolvency agreements.
This is not a surprise to those of us working in the space every day. But it is significant.
Because personal insolvency is rarely just a number. It represents prolonged financial stress. Difficult conversations at home. Directors who have carried business pressure longer than they should have.
So what does this actually mean as we settle into a new year?
The pressure has shifted from business to personal
Over the past few years, we saw rising corporate insolvencies. Construction was hit hard. Retail and hospitality felt the impact of cost increases and margin pressure. The ATO resumed more active recovery.
What we are now seeing is the personal side of that stress playing out.
Many small business owners have:
- Personally guaranteed business debt
- Used personal assets to support their company
- Deferred difficult decisions hoping trade would improve
When a business struggles for an extended period, the line between company and personal finances becomes thin. The AFSA data reflects that reality. This is not just about failed businesses. It is about directors carrying the weight of prolonged uncertainty.
“Prolonged stress” is the real theme
The key word for me in this data is not increase. It is duration.
Most insolvencies do not happen suddenly. They follow months, sometimes years, of tight cashflow, ATO pressure, supplier strain and personal borrowing.
By the time someone considers bankruptcy or a debt agreement, they are often exhausted. Financially and emotionally. That is the part we do not see in the statistics.
As we begin 2026, the key takeaway is this: delayed action narrows options.
What directors and business owners should be thinking about now
January and February are good months for reset thinking. Not reactive decisions. Calm assessment.
If you are a director or small business owner, it is worth asking:
- Are company tax lodgements fully up to date?
- Are superannuation and PAYG obligations current?
- Do I clearly understand what I have personally guaranteed?
- Is my business solvent today, not just hopeful for tomorrow?
- Have I had independent advice outside my usual accountant or bank?
Early advice does not automatically mean formal insolvency. In fact, the opposite is often true.
The earlier someone seeks advice, the more pathways are available. That may include restructuring, informal negotiations, or simply a clearer strategy for stabilisation.
For accountants and lawyers: your clients may not be telling you everything
One of the patterns we see repeatedly is this. The director speaks to their accountant about BAS. They speak to their lawyer about a dispute. But they do not disclose the full financial picture.
Often the spouse does not know either.
The AFSA numbers are a reminder that personal exposure is rising. That means professional advisors should be gently probing:
- Is there personal exposure here?
- Are guarantees in play?
- Has ATO correspondence escalated?
- Is safe harbour being properly considered?
A short, early referral for a second opinion can protect both the client and the advisor relationship.
2026 is about awareness, not alarm
There is no benefit in sensationalising insolvency data. Markets move in cycles. Economic pressure ebbs and flows. But ignoring data is not a strategy either.
The increase in personal insolvencies tells us that financial stress has not disappeared. It has simply shifted and matured.
If you are a business owner, this is the year to be proactive.If you are an advisor, this is the year to have earlier conversations.
And if you are feeling the pressure personally, understand this: seeking advice is not failure. It is responsible leadership.
The earlier the discussion happens, the more options exist.That has been true for 35 years in this profession. It remains true in 2026.
Need to discuss a client scenario confidentially?
Contact Insolvency Options for a no-obligation consultation, we work alongside you to protect your client relationships and find the best path forward.
Book a confidential consultation with Darren
Want to go deeper?
For more insights into business recovery and debt solutions, listen to the i.O. — Insolvency Options podcast wherever you get your favourite podcasts. Each episode breaks down complex insolvency processes in plain English, with real world examples to help accountants, lawyers, and business advisors guide their clients with confidence.