The Dark Cloud of More Lockdowns Has a Silver Lining for Small Business

COVID Lockdowns have hit Australian small businesses hard without question. You only have to walk the streets of the Sydney CBD to see empty spaces where cafes and restaurants once thrived. With big business continuing to work from home, foot traffic hasn’t come close to recovering to pre COVID levels.

The puzzle we have been wrestling with is why insolvency numbers have not only not increased, but significantly decreased throughout 2020 and into 2021. Now that Government subsidies and protections have been stripped away, we have only seen minimal change to the record low insolvency rates.

We think the major factor now keeping insolvency rates low is the reluctance of major creditors to chase debts. The ATO were very quiet for all of 2020 and only started chasing late lodgements (not payments) in the first half of 2021. Before COVID the ATO used to apply for an average of five court wind ups every day, in 2021 they have applied for six total.

The large drop in personal insolvencies from the middle of 2018 starting with the delivery of the results of the Banking Royal Commission and accelerating with COVID show how far the banks have backed away from debt pursuit.

The good news among the bad tidings of more lockdowns in Australia is these creditors are not likely to get back into chasing debts any time soon, and with each lockdown “D-Day” gets further away. The scuttlebutt we hear is the ATO are not likely to start chasing debts again in earnest until after the Federal Election.