Insolvencies hit second-highest level in history in August

Another month, another set of ugly collapse figures – the number of corporate insolvencies reached their second-highest level in August since records started in the late 1980s, according to the Australian Securities and Investments Commission.

The new figures show that 1,049 companies entered external administration in August 2011, up 14% from 921 in July, and 20% higher from 870 in August 2010.

The numbers, released last week, also show there were 1,531 insolvency appointments in August – an increase from 1,248 in July, and 1,289 in August 2010.

Cliff Sanderson, of company liquidator Dissolve, says the August monthly figures mean there have been six monthly highs so far in 2011 – and the Australian Taxation Office is largely behind the increase.

"At the basis of a lot of them is the ATO," Sanderson says.

"While the petitions they lodge in court are up a bit but not a lot, the ATO's actions cause a lot of directors to move. And as they would – they're often the last to get paid."

Sanderson says while ASIC doesn't break the numbers down into sectors, Dissolve is seeing lots of activity from small retailers and tradies such as builders and plumbers who have about five to 10 employees.

He says while calls to Dissolve in September were lower than in August, the insolvency records won't stop unless the ATO decides to soften its stance against struggling companies.

"I predict moderate further increase throughout the rest of year, but this is largely dependent on the ATO," Sanderson says.

"The ATO put away their pen a few years ago and if they get the same instruction, the numbers will turn around, but it's a fake turnaround."

"If the ATO continues to plough through its backlog, the numbers will increase."

State-by-state, Sanderson says Tasmania and Western Australia are "looking bad," collapses in New South Wales have reached a plateau, Victoria is up a bit, and calls from Queensland are on the up.

"Based on indicators over the last couple of months, the effects of the floods are starting to come through," Sanderson says.

This article originally appeared on SmartCompany.