Last week the Australian Financial Security Authority released its personal insolvency activity statistics for the March quarter 2017.
In the quarter 7,900 new personal insolvencies were recorded, indicating a 10.8 per cent increase on the March quarter 2016.
When broken down into types of insolvency, personal insolvency agreements increased by 139.5 per cent, debt agreements increased by 20.8 per cent and bankruptcies only increased by 2.5 per cent.
Speaking to Accountants Daily, Worrells partner Aaron Lucan said that the increase was driven by the aftermath of the mining boom and crash.
“You have to look at the regional statistics to really get some insight and if you look at both Queensland and Western Australia, they are recording large increases. That, in my opinion, is strongly related to the slowdown in the mining sector,” Mr Lucan said.
“If you look even more closely at the data and look at some of the postcodes that are most affected, you will find that those postcodes are in those areas which are near the mining regions.”
“Even some of the capital city postcodes where there is personal insolvency activity, they are people who have relocated out of those mining regions back to the city chasing work, and simply they don't have the same income that they had two, three, four years ago.”
Mr Lucan said that this increase presents an opportunity for accountants to assist where necessary.
“Clients need assistance in these circumstances, they need answers from accountants,” he said.
“An accountant who can help provide a client with a solution in times of financial hardship has a good chance of retaining that client even if it means you have to wait for that client to get back on their feet before they become a decent client again.”
However, Mr Lucan urged accountants to ensure they are up-to-date and well-informed on the insolvency process and how it works.
“My experience with accountants, particularly a number of regional accountants, they are quite time-poor and they don't have a good understanding of insolvency and the insolvency process,” He said.
Finally, looking ahead, Mr Lucan said he expects the number of insolvencies to continue to increase.
“We saw a peak in insolvency numbers around 2008-09 with the financial slowdown, then there was a drop off, and we now have an upward trend again with the mining slowdown,” he said.
“That will remain the general trend; the rate of increase might slow but that will remain the general trend I think.”