Economic downturn now insolvency driving force

Tax debt hangovers from the pandemic are behind the rise in SME insolvencies but adverse economic conditions now drive company wind-ups and it will only get worse, say two specialists in the area.

Speaking on the latest Accountant Daily podcast, Jirsch Sutherland national managing partner Bradd Morelli and Sydney partner Andrew Spring said people on fixed incomes were cutting back and hitting sectors that had barely recovered from Covid.

“We might avoid a technical recession but we will definitely come into – if we're not experiencing now – a per capita recession,” said Mr Morelli. “I struggle to see how the conditions can't worsen over the next 12 or 18 months.”

Mr Spring said economic impacts often manifested in tax debt.

“The reasoning behind why the tax debt has accrued is impact at top line, at revenue line, which can largely be a result of the economic impacts at consumer level around discretionary spend, or higher costs.”