Voluntary Exits and Insolvency Rise Among SME Businesses as Large Business Insolvency Declines

Equifax Business Market Pulse: Q2 2026 Business Credit Trends

SYDNEY – 13 August 2026 – Equifax Australia insights reveal that in Q2 2026, the rate of SME businesses choosing to wind down operations voluntarily outpaced the rate of those entering formal insolvency at +16% YoY (compared to large business Company insolvencies which dropped by -7.8% YoY). Concurrently, new SME business entries fell by -16%, in comparison to large businesses where entries fell by -6% YoY. Across the market Australian Taxation Office (ATO), tax default disclosures grew +18% YoY, fueled by a +42% jump in new tax default filings. 

Business Exits Among Australian Businesses
Across the Australian SME landscape, unincorporated business exits rose +37% YoY, while business insolvencies ticked up +16% YoY. At the same time, headline large business company exits doubled (+100% YoY). However, the data indicates that this dramatic increase among large businesses appears to be partly driven by regulators clearing out inactive entities post-COVID.

Brad Walters, General Manager, Commercial at Equifax, said "What we are observing is a bit of a 'quiet exit' from many small to medium sized businesses in Australia. Rather than allowing liabilities to accumulate into formal administration, directors are electing to deregister and walk away as trading conditions remain demanding. Coupled with a decline in new business entries, it indicates a reluctance to commit new capital until the macroeconomic outlook stabilises.

While the +100% spike in large business company exits looks severe at first glance, it appears to reflect more of an administrative clean-up by regulators winding down dormant 'zombie' companies. That said, it doesn't negate that genuine, organic exits were likely also occurring alongside this administrative housekeeping.”

ATO Disclosures Increase as Businesses Feel Balance Sheet Pressure
Tax debt disclosures have emerged as a significant pressure point across Australian enterprise balance sheets. Active ATO tax default disclosures increased +18% YoY, driven by new disclosures outpacing removals, as new tax default filings surged +42% YoY.The accumulation of active tax disclosures seems to be driven by enhanced regulatory visibility alongside tight working capital conditions across key sectors.

"The sharp rise in new ATO default disclosures likely reflects both increased tax authority enforcement and tight operational cash flows,” added Walters. Businesses are constantly having to make choices about which financial commitments to prioritise. Many businesses are managing immediate day-to-day operational expenses to maintain active operations, but this is increasingly leaving tax liabilities as a primary point of pressure on their balance sheets."

Insights Show Sector Pressure Varies
Equifax data reveals that operational pressure varies across Australian industries, with key sectors experiencing sustained exit activity and falling entry rates:

• Construction: Large business exits surged +114% YoY, while small business exits rose +58%. Market entry rates declined across both categories, falling -17% for companies and -19% for small businesses year on year. Company insolvencies eased -3.8% YoY, but Business insolvencies rose +9%. Active ATO default filings increased +18% YoY, and there was a +43% jump in new tax default disclosures observed. Operational pressures are mounting in construction, as observed by falling on-time trade payment rate (3% YoY) and rising early stage arrears (4.7% YoY).
• Hospitality: Large business exits doubled (+106% YoY), whereas company insolvencies dropped -20.3% YoY. Similarly, business insolvencies fell 14% YoY. New ATO tax default disclosures in the hospitality sector rose +47% YoY. Rising early and medium stage arrears are pointing to operational constraints for business owners in the hospitality sector.
• Retail: Large business exits rose +101% YoY, compared to  a +54% increase in small business exits. Insolvencies moved higher across both company insolvencies (+5.8% YoY) and business Insolvencies (+60% YoY). New ATO default filings surged +54% YoY. Retail businesses are showing more discipline in reducing their exposure to late payment penalties, with on-time payments improving 5.1% YoY. Data shows that Retail has had the best on-time payment rate out of all the other sectors.
• Logistics: Large business exits expanded +115% YoY, while small business exits rose +40%. Company insolvencies fell -1.4% YoY, and business insolvencies climbed 6%. New ATO default disclosures grew +48% YoY. While on-time trade payment rate improved 2.4% YoY, there also was a 20bps uptick in delinquency rates, which may signal intensifying operating conditions.
• Professional Services: New entries saw declines across both large business (-29% YoY) and small businesses (-34% YoY).Corporate exits grew +99% YoY, while business insolvencies grew by +46% YoY.

Highlighting individual sector dynamics, Brad Walters said, "Looking across key business sectors, thin operating margins and sustained wages and input costs continue to influence outcomes. In construction, retail, and hospitality, the spike in voluntary exits shows that operators are choosing to close before reaching severe distress. Meanwhile, sectors like logistics are navigating persistent cost pressures tied to fleet maintenance and fuel costs, driving higher credit search activity across various risk tiers. Logistics is also one of the few sectors with an observed increase in its delinquency rate".

Credit Shopping Trends Across Key Segments
Equifax insights show that high-risk commercial entities (business credit scores below 600) are actively making multiple credit inquiries across different credit providers to secure capital.

In hospitality, high-risk borrowers recorded an +8% YoY increase in credit shopping rates, whereas low-risk businesses reduced their credit shopping rates by -2% YoY. Similarly, logistics businesses  showed elevated credit shopping across high and medium-risk tiers as businesses seek competitive financing terms, likely to manage fleet investments.

"When observing credit shopping patterns, we see high-risk businesses are submitting multiple applications across various lenders, while prime entities are taking a far more measured approach. For credit providers in this environment, observing these underlying shifts in voluntary exit rates, tax defaults, and multi-lender enquiries will be essential in continuing to evaluate commercial risk."

-Ends-

Chart 1: National Company and Business Insolvencies

Key Definitions: 

• Companies Insolvencies: Company Insolvencies relate to incorporated companies that are registered through ASIC filing for a bankruptcy or insolvency. 
• Business Insolvencies: Business Insolvencies relate to unincorporated businesses that are owned by individuals, by a partnership or trust and are typically representative of Sole Traders and Smaller Businesses.
• Credit shopping: Two or more subsequent enquiries for the same product made to multiple lenders within 30 days.

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NOTE TO EDITORS
The Equifax Business Market Pulse measures the volume of credit applications for business loans, asset finance and trade credit that go through the Equifax Commercial Bureau by financial services credit providers in Australia. Based on this, it is considered to be a good measure of intentions to acquire credit by businesses. This differs from other market measures published by the RBA/ABS, which measure new and cumulative dollar amounts that are actually approved by financial institutions. 

Equifax may quote publicly available data and known information from reputable sources (such as, but not limited to, ABS, ASBFEO, MYOB) in the Market Pulse to provide greater context on the market conditions surrounding Equifax observed credit trends. Unique enquiries refer to the first enquiry made by an entity, while ‘credit shopping’ is defined as two or more subsequent enquiries for the same product made to multiple lenders within 30 days.

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