Article by Elizabeth Pike, courtesy of The Australian
02.02.2026
Small businesses are going bust in record numbers, with new analysis of insolvency data pinning the blame on the Albanese government’s tax and red tape regime, as an industry body calls for a major policy shift if Labor wants to keep the sector alive.
Ahead of an expected interest rate rise and lingering inflation pressures, the Liberals have also taken aim at the government for “treating small businesses like an ATM” after 14,722 businesses entered insolvency in the 2025 financial year.
The figure marks a 33 per cent rise on the previous year and stands in stark contrast to the year first Labor took office in 2022, when fewer than 5000 businesses collapsed, according to Australian Securities and Investments Commission data.
Although there were an additional 190,000 firms operating at the end 2024-25 compared to the end of 2021-2022, Australian Bureau of Statistics data reveals small businesses were particularly hard hit with 33,587 enterprises with between “one and four employees” going under.
The Council of Small Business Organisations Australia said long-term structural pressures were underpinning the insolvencies, as it laid out priorities for the government to adopt in this year’s federal budget.
Council chair Matthew Addison said the government must change its tax settings, create a permanent $150,000 instant asset write-off scheme and slash red tape if it wanted to prevent further collapses.
Insolvency rates were artificially low during Covid and economists attributed the spike to the removal of support schemes, but Mr Addison said the latest numbers were just the “tip of the iceberg” and many more owners had restructured or walked away without a formal wind-up.
“The 2025 insolvency numbers are very high because the current economic environment is extremely harsh for small businesses,” Mr Addison said. “If we want stronger productivity growth and more secure jobs, the policy environment has to support small businesses to invest with confidence, employ people and expand their operations.”
Mr Addison said reviving the Covid-era $150,000 tax break would be crucial to business investment, after the Albanese government flagged that it would wrap up its $20,000 instant asset write-off scheme by June.
The organisation will also seek to cut the small business company tax rate from 25 to 20 per cent for businesses earning less than $20m, while Mr Addison said the federal government must step up to create a national approach to “harmonising payroll tax regimes” between the states and territories.
Calls for the policy shift come after the recent December quarter marked one of the worst periods for small businesses since 1999 after 3856 companies entered external administration for the first time, ASIC data shows.
The Liberals have accused the government of turning its back on the sector, with opposition small business spokesman Tim Wilson taking aim at Labor’s policy settings for having “suffocated” almost 40,000 mum-and-dad enterprises “to insolvency”.
“The Albanese government has prioritised laws for higher taxes and cartel kickbacks to unions paid from small businesses,” Mr Wilson said.
“Labor is just treating small business like an ATM, and the more that go insolvent the more they withdraw from those that survive, which is why we’ve had the worst quarter of business insolvencies since records began.”
Small Business Minister Anne Aly did not touch on the insolvency rates but pointed to the release of Labor’s National Small Business Strategy last year, which she said was “bringing governments across the nation together to cut red tape”.
