2026 A Practical Way to Think about the Year Ahead
It is the beginning of another New Year with the promises of being different but as usual the same in so many respects.
We look positively into the abyss to see and predict what will happen which is always challenging, January always feels like a warm-up with things around us operating at part speed, but we can be sure that it will be a year where data, timing, structure and action will matter more than sentiment and procrastination.
One certainty that you, your Clients, Associates and connections can rely on is that if you need assistance or a sounding board we are always there to have a chat, plot the course or help you deal with the issues and stresses that often can lead to the creation of financial difficulty in any of the industries you, your clients, associates and other stakeholders may be in.
It is important to remember that in 2026 you are not alone and Macks Advisory is just a phone call away.
A Practical Way to Think About the Year Ahead
The insolvency outlook for 2026 appears challenging with rising costs, potentially higher interest rates and possible shortages of capital, but it is not without solutions. If you have a Client whose business is showing early signs of pressure or distress be proactive and stress to them not to wait until their options and solutions are reduced, or worse run out, advise them to seek early professional advice from people who have decades of practical experience.
Where is the Insolvency stress coming from?
In simple terms business is being squeezed from all side. Economic conditions– inflation, cashflow pressures, and rising costs have increased arrears risk. Adding to the financial strains are the everyday costs of doing business such as rising energy prices, in some cases a 52% cost increase, the escalating costs of insurance premiums, rental and out goings increases making it more and more difficult to remain profitable.
The ATO Debt Recovery and Director Penalty Notices (DPN’s) has increased to more than 84,000 in FY 2024-2025 as compared to 26,702 DPN’s issued in FY 2023-2024. In addition, beyond DPN’s the ATO has issued over 15,000 garnishee notices in the last financial year, directing money held for debtors by a third party to the ATO itself. The ATO is now a major driver of insolvency in many industries.
A Difficult Road, But Not a Dead End
With the insolvency outlook for 2026 appearing quite challenging again it is not without solutions - Early intervention, expert guidance, and strategic financial planning can mean the difference between managed recovery or insolvency.
According to a recent CreditorWatch survey, in the last year Australian businesses failed at the highest rate since October 2020. The food and beverage sector saw the most failures in October 2025, with a failure rate of 8.5%, compared to the 8.3% in the preceding 12 months. Also notably Australia's construction industry has been hit hard as has the retail sector which bore the brunt of the unexpected and in some cases unprecedented inflation forcing many well known brands to reassess, halt operations or shut down completely in the face of rising costs which could not be managed.
In speaking to a friend, confidant, and business associate interstate recently it seems that coming back after the break we are all confronted by uncertainty as the dynamics affecting various businesses and industries are even more unsettled than normal. Business models that are inherently fickle, exposed to uncertain customer support and perhaps reliant on Government intervention, support are even more vulnerable. In any event industry support systems are becoming far more bureaucratic and inflexible, hungry for information to be properly extracted, compiled for those seeking support with “ brands” no longer having reliable income streams particularly in the face of rising costs.
Key observations to keep in mind
- Stay Ahead of Financial Warning Signs. Poor cash flow, mounting tax debts, and falling revenue are all early indicators of trouble. If you or your clients identify these signs time is of the essence, act now — delaying intervention only reduces available options and lowers the chances of survival
- Engage Insolvency Experts Early. If you or your clients are struggling with debt, seeking professional advice is crucial. A business with high tax debt, late superannuation payments, or an overdue loan may still have plenty of options — but only if action is taken early and proactively
- Prioritise Tax and Secured Debt. Unpaid tax and secured debts (like business loans) should be managed strategically. Engaging with lenders promptly can lead to better repayment terms and reduce the risk of forced insolvency.
- The ATO’s Approach has shifted to a tougher stance Don’t Wait for a DPN — Act Before It’s Too Late. Several factors are driving this, Pandemic-era leniency has ended – the ATO is winding back the support measures that kept businesses afloat, this occurs at a time when debt levels have ballooned – delayed and deferrals left small businesses deep in arrears, with policy and mandate shifting – government pressure is pushing the ATO to enforce stricter compliance. Receiving a Director Penalty Notice (DPN) is a clear red flag. If your business has significant unpaid tax liabilities, taking action before the ATO escalates enforcement is the best way to protect both personal and business assets.
The key is early intervention, expert guidance, and strategic financial planning which can mean the difference between insolvency and recovery. The pathway into insolvency varies, it typically follows an extended period of cashflow difficulty.
Some modelling we have seen suggests a further increase in appointments across Q1 FY 2026 following the expected spike in October, November 2025 (awaiting confirmation from statistics). These were notably driven by the 12–15-month lag in interest rate stress (particularly personal and mortgage lending), alongside continued weakness in Construction, Hospitality, Retail, Admin, and Professional Services sectors. High costs, labour shortages, and slowing consumer spending have severely impacted these sectors. Construction, in particular, remains vulnerable due to rising material prices and delays in payments from larger projects.
Risks and Impacts for Directors
Implications for directors are serious:
- Greater likelihood of being personally liable for business tax and super debts;
- Shorter timeframes to respond, limiting options for remission;
- Stricter scrutiny of payment plans and hardship arrangements;
- Higher risk of insolvency or wind-up for businesses unable to meet obligations.
For directors, ignoring the issues is no longer viable highlighting the importance of engaging a reputable practitioner with experience and empathy early.
What then do Businesses and Advisors Need to Do
While the data shows insolvencies are on the rise, it doesn’t mean your businesses’ failure is inevitable. Businesses that take proactive steps today can significantly improve their chances of survival into the future and in some cases coming out stronger.
Stay Ahead of Financial Warning Signs
Poor cash flow, mounting tax debts, and falling revenue are all early indicators of trouble. If you or your Clients spot these signs, act now — delaying intervention only reduces available options and lowers the chance of survival.
Engage Insolvency Experts Early
If you or your clients are struggling with debt, seeking professional advice is crucial. A business with high tax debt, late superannuation payments, or an overdue loan may still have plenty of options if action is taken early and guided by an experienced professional.
Don’t hesitate give us a call on m 0419 804 612 for immediate assistance or if you need a just a quick confidential chat about issues or situations. We have decades of experience in many key industries and have a proven record in dealing with both simple and complex commercial problems and issues capable of challenging what appears the certainty based on solid foundations and experience.
