If the start of 2026 already feels financially tight, there’s a reason. Data released from the Australian Financial Security Authority  (AFSA )shows business-related personal insolvencies jumped 38 per cent year-on-year in December 2025.

The data suggests that many business owners ended last year under serious financial pressure and are now carrying that stress into 2026.

The AFSA data reveals 344 people who entered personal insolvency in December were also involved in a business, up from 249 at the same time in 2024. That rise suggests the financial hangover from 2025 is far from over for many small business owners.

Personal finances crack under business burden

The data suggest this isn’t an overnight failure, but rather death by a 1000 bills. According to insolvency firm Jirsch Sutherland, business owners are holding on for as long as they can, until personal finances finally crack.

“The December figures reflect a broader pattern, with personal insolvency increasingly occurring later in the business distress cycle,” says Emma Mos, Partner at Jirsch Sutherland. “ What we’re seeing is the personal impact of prolonged business stress.”

Over the past four Decembers, business-related personal insolvencies have climbed from 163 cases in 2022 to 344 in 2025. During that same period, the share of all personal insolvencies involving someone connected to a business has also jumped from around 27 per cent to more than 32 per cent. That points to a structural shift, not just a tough year.

Bankruptcies now dominate

One of the more sobering stats in the data is the rise in bankruptcies.

In December 2025, bankruptcies made up more than 60 per cent of all personal insolvencies, up sharply from previous years. Back in December 2022, there were 363 bankruptcies. By December 2025, that number had climbed to 651.

Debt agreements have grown more slowly, while Personal Insolvency Agreements remain low and largely unchanged, suggesting that by the time many business owners seek help, their options are already narrowing.

And while construction cops plenty of headlines, those entering insolvency come from a broad spread of industries, including retail, transport, warehousing, healthcare and personal services.

When business pressure hits home

Mos says many of the cases her firm sees involve business owners who didn’t adjust their structure as their business grew and the consequences can be painful.

Mos tells the story of one sole trader in residential construction who took on larger contracts without incorporating. When cash flow tightened and supplier bills stacked up, the pressure didn’t stop at the business.

“Over the following six to 12 months, that pressure flowed through to personal bankruptcy, with trade accounts and personal guarantees leaving not only the business owner but also his home at risk,” she says.

Insolvencies likely to continue to rise

AFSA data also shows personal insolvencies rising across most states, with strong growth in Queensland, sharp increases in Western Australia from a lower base, and steady rises in NSW and Victoria.

Mos warns the pressure will continue to mount as year-end stress collides with early-year obligations, including BAS statements due at the end of February, legacy tax debts and a higher interest rate environment.

“Once personal exposure intensifies, options narrow quickly,” she says. “Seeking advice early can make a material difference to outcomes.”

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