Fashion and discretionary retail is driving the bulk of retail insolvencies, which have jumped by 170 per cent in the last three years.
This is according to new analysis from insolvency firm Jirsch Sutherland, with firm partner Andrew Spring saying the growth in retail insolvencies continue to rise each year, a different contrast to overall insolvencies across all businesses which appear to have plateaued in recent years.
ASIC data shows overall insolvencies in 2026 have been trending slightly below last year, albeit still quite elevated. In March 2026, total insolvencies hit 1,597, which is down from a peak of 1,918 in March 2025, but above March 2024 when it was 1,401.
For retail, there were 319 insolvencies in FY22, which grew to 871 in FY25. For FY26 to March 31, retail insolvencies are at 757, and may hit a new peak by the end of this financial year.
“Fashion and discretionary retail are right at the centre of this,” Spring said. “These businesses are highly sensitive to consumer confidence, and many are now relying on sustained discounting to drive sales, which continues to erode already tight margins.”
This isn’t just an Australian story either. Citing research from global firm Forrester, Spring said there is a potential wave of failures to come across mid-tier and specialty retail globally, particularly in discretionary categories, as businesses shift from growth to profitability in a tougher operating environment.
“Another challenge for retailers is delayed decision-making by consumers,” Spring said. “The impact of customers choosing to buy next week instead of this week can create immediate cash flow pressure, forcing changes to pricing and further eroding margins.
“Product mix and stock turn, which are always critical in retail, become even more important in this environment as businesses look to protect cash flow and maintain liquidity.”
Spring said that while unemployment remains low, many retailers may be able to weather rising input costs. However, if business investment slows and unemployment rises, the sector could come under much greater pressure – particularly discretionary retailers.
“The key for retailers now is to stay on the front foot – actively managing cash flow, engaging early with advisers and creditors, and taking proactive steps to stabilise operations before pressures escalate.”
Looking at the overall landscape in Australia, Jirsch analysis is spotlighting a ramp-up in court-led debt recoveries by Australia’s Big Four banks – being Commonwealth Bank, Westpac, NAB and ANZ. The firm believes this signals a shift in the credit enforcement landscape.
This shift is reflected in the latest Alares Credit Risk Insights for March, which show insolvencies holding near record highs in March, alongside a sharp rebound in court recoveries from the big four banks following a year-long lull in enforcement activity. Winding up applications also continue to trend higher, particularly those initiated by non-ATO (Australian Taxation Office) creditors.
“The data suggests this isn’t a short-term spike, but a more sustained period of increased enforcement,” Spring said. “We’re seeing enforcement activity broaden significantly. It’s no longer concentrated in one area; the ATO, banks and other creditor providers are all active, creating a much tighter environment for businesses under pressure.”
The data from Alares also show that insolvency levels remain elevated, rather than normalising following the post-COVID catch-up.
There is also a plateau in Small Business Restructuring (SBR) appointments, following a decline in 2025, with ATO enforcement remaining active, including the continued use of disclosure measures to identify outstanding tax debts
Alares director Patrick Schweizer said that tax debt transparency is reaching unprecedented levels, which often acts as a catalyst for other creditors. “March saw further increases in the ATO’s business tax debt disclosures, with more than 35,000 businesses now subject to ATO reporting,” he said.
Spring said the ATO’s use of business disclosure measures is changing how financial distress plays out. He said greater visibility around tax debt means issues can surface more quickly, not just for the ATO but for other creditors as well.
“This can shorten the timeframe for businesses to respond and, in some cases, prompt earlier enforcement action from multiple parties,” Spring said.
While SBR activity has eased, Spring says restructuring remains an important option where businesses act early.
“We’re continuing to see viable businesses use SBR to stabilise and restructure,” he said. “At the same time, voluntary administrations have lifted significantly – now sitting at roughly double pre-2023 levels – reinforcing that more businesses are reaching the point where formal intervention is required.”
On top of this, borrowing costs remain elevated and margins across businesses are under pressure, with creditors becoming less willing to wait and more likely to act.
Looking ahead, Spring said that upcoming policy changes are likely to further compress cash flow for some operators. “Measures such as Payday Super will remove some of the timing flexibility businesses have historically relied on,” he said. “For those already under strain, that has the potential to bring forward financial distress rather than defer it.”