As FY25 comes to a close, it presents an opportunity to reflect on the past 12 months—on earlier forecasts, actual outcomes, and the broader conditions shaping the year ahead.
Inflation and labour shortages have remained key challenges across the economy. According to ASIC data, these pressures have had a marked impact on the Construction and Hospitality sectors, which together account for approximately 65.7% of all formal insolvencies across the top five reported industries for FY2025 year-to-date.
There are however, signs of a possible shift. A recent interest rate cut—alongside forecasts of further easing—may indicate that the cost-of-living crisis is beginning to stabilise. With the Federal election now behind us, overall sentiment appears to be trending more positively as the economy enters FY26.
That said, global uncertainty continues to present risks. Questions remain around the ongoing impact of US tariffs, the duration and escalation of overseas conflicts, and their broader influence on both international and domestic markets.
Domestically, a significant regulatory change is set to take effect from 1 July 2025: interest on overdue ATO debt will no longer be tax deductible. With the ATO currently applying interest charges exceeding 11% on outstanding balances, this shift will increase the effective cost of such debt.
From our experience we have observed that allowing tax debt to accumulate over time is a common signpost of impending business failure. In many instances, these debts are not addressed until firmer enforcement action is taken—such as the issuance of a Directors Penalty Notice (DPN) or Statutory Demand.
The ATO is currently pursuing approximately $50 billion in collectable debt. It is also worth noting that DPNs do not carry a statute of limitations, and unresolved notices may continue to present implications well into the future. Read more about DPNs here. – Director Penalty Notices – Expect to see a pick-up in personal insolvencies during FY25 – Cathro & Partners
Overall, the legacy impact of economic disruptions over the past few years remains a factor for many businesses. While the outlook may be improving in certain areas, financial pressures continue to emerge in others. As FY26 begins, staying informed about regulatory changes and broader economic conditions may support business owners and stakeholders in navigating what lies ahead.
