iscoverThe Australian Financial Security Authority has unveiled its State of the Personal Insolvency System report for 2024-25.
Personal insolvencies rise for third consecutive year: AFSA
20 November 2025
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9 minute read
The annual State of the Personal Insolvency System report has been released by the Australian Financial Security Authority (AFSA) for 2024-=–25, highlighting a 5.3 per cent increase from the previous year.
From this 5.3 per cent increase in personal insolvency, it was shown that 12,257 individuals entered personal insolvency over the year, which marked the third consecutive rise.
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AFSA said that while volumes remained below pre-pandemic levels, the upward trend reflected a significant level of financial stress among households and small businesses.
The data found the most common reason people were entering insolvency was related to an excessive level of borrowing – 37.3 per cent of people, closely followed by unemployment and business failure.
According to AFSA, the personal insolvency system continued to act as a “safety net” for financially vulnerable Australians, as nearly half of all debtors had debts under $50,000.
Business-related personal insolvencies made up 28.8 per cent of new cases but accounted for 78.8 per cent of new debts, highlighting the disproportionate impact on sole traders and small business operators.
This was noted to be the case for the construction and other services sectors, as they together made up more than one-third of business-related insolvencies.
Time Beresford, AFSA chief executive, said in 2024–25, only 79 individuals with total debts over $10 million accounted for $3.9 billion or 59.3 per cent of all new liabilities, and suggested the full distribution of debt needed to be looked at as the outliers distorted the averages.
“We’re also seeing signs of weakening financial resilience. One in five debtors had an asset-to-liability ratio below 10 per cent, meaning they had very limited capacity to absorb financial shocks,” he said.
“Creditor dynamics are shifting, too. The ATO remains the largest single creditor, while traditional banks continue to tighten lending standards. At the same time, Buy Now, Pay Later (BNPL) and subprime lenders are gaining ground.”
“Forty-nine per cent of all new debtors had BNPL debts and, among debtors aged 29 or younger, that figure jumps to 65.2 per cent.”
For the future, AFSA revealed it was predicting personal insolvency numbers to rise moderately to 13,000 in 2025–26 and 13,750 in 2026-27, driven by persistent cost-of-living pressures and volatile economic conditions.
“This report offers a strategic look at how personal insolvency is evolving, not just who is affected, but why, and what these patterns say about the health of Australia’s $3.9 trillion credit system.”
In addition to personal insolvency numbers, the report also highlighted the progress and role of the personal property securities registrations’ (PPSR) role in “protecting consumers, credit and the economy”.
It was highlighted in the report that PPSR reached approximately $450 billion, and there were 2.2 million new registrations, bringing the total to over 10.7 million active registrations.
This $450 billion of economic value was noted to be approximately 16 per cent of Australia’s GDP and considered to be the backbone of secured credit.
Beresford said the PPSR acted as a national record of what assets were registered to secure certain debts, who held the associated rights and captured the interests linked to secured payment obligations, including leases, licensing and intellectual property use.
“This clarity protects consumers and lenders and builds confidence in buying and selling personal property,” he said.
Searches of the PPSR rose to more than 13.1 million, with motor vehicles remaining the most searched collateral class and accounting for 55 per cent of all searches.
Beresford noted the PPSR was an essential credit infrastructure which helped Australians buy and sell, borrow and lend confidently and with a sense of security.
“With over 10.7 million registrations and secured interests carrying a potential economic value of around $450 billion, approximately 16 per cent of Australia’s GDP, the system continues to protect consumers and lenders and support the proper functioning of the economy,” he said.
“In 2025-26, we’re focused on keeping the register accurate and up to date. A key priority is making sure users remove registrations promptly once a loan is repaid. We’ll work closely with financial institutions, PPSR users and other stakeholders to lift practices across the board.”
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