Tax defaults jump 48% year-on-year as business cash flow pressure mounts

New data from Equifax has revealed a sharp rise in Australian Tax Office (ATO) defaults and severe debt delinquencies, pointing to mounting cash flow pressure across the Australian business sector.

The May 2026 Equifax Business Market Pulse, which tracks trading day-adjusted credit demand figures, recorded a 47.9% year-on-year increase in new ATO tax defaults in May 2026, alongside a spike in severe delinquencies — debts 91 days or more overdue — to 11.3% of overall market debt in April, up from approximately 8% in March.

Business loan demand among large enterprises rose 15% year-on-year nationally, while SME business loan applications grew 9.1% over the same period. However, asset finance applications fell across both segments, down 2.1% for large businesses and 4.1% for SMEs, suggesting widespread caution around major capital expenditure.

Overall business insolvencies tracked by the Australian Financial Security Authority (AFSA) rose 9.3% year-on-year in April 2026, while company insolvencies recorded by the Australian Securities and Investments Commission (ASIC) fell 10% over the same period — a divergence that points to greater stress among smaller and unincorporated businesses.

On a state-by-state basis, NSW recorded the strongest SME business loan growth at 5.4% year-on-year, and was the only state to post positive asset finance figures across both large businesses and SMEs. Victoria was the only state where SME business loan demand contracted, falling 0.7% year-on-year. Queensland SME asset finance demand recorded the sharpest decline nationally, falling 9.33% year-on-year.

"The May Equifax Business Market Pulse highlights growing pockets of stress among the Australian business credit landscape, as well as pockets of resilience amid economic headwinds," said Brad Walters (pictured right), general manager of commercial at Equifax.

"Nationally, we are seeing asset finance applications pull back for both large corporate enterprises (-2.1% YoY) and SMEs (-4.1% YoY), signaling a mutual pause on major machinery, fleet, and equipment upgrades across businesses at large. It appears likely that organisations of all sizes are exercising caution before committing capital to major upgrades in the current economic environment."

The data also points to rising cash flow pressure across the broader business community, Walters added.

"We are tracking a trend where companies are falling behind on what they owe, with severe 91-plus day delinquencies jumping to 11.3% of overall market debt in April, up from around 8% in March," he said. "At the same time, we have observed a 47.9% surge in new ATO tax defaults.

"This indicates a pattern where businesses may be delaying their tax obligations to keep cash on hand. There is a divide in how different-sized businesses are managing this cash squeeze. Australia's large companies appear to have more financial breathing room to handle the pressure. They are continuing to expand their funding lines, with business loans up +15% YoY. This extra capital support seems to be keeping them stable, with larger corporate insolvencies under ASIC actually falling by -10% YoY."

"In contrast, small businesses and sole traders appear to be feeling more pressure. While their demand for new business loans grew by a softer, yet resilient 9.1% YoY, unincorporated small business insolvencies under AFSA rose by 9.3% YoY – moving in the exact opposite direction of big corporate Australia. Given that smaller enterprises are the backbone of our communities and vital to employment, watching this gap widen shows the real pressure building at the grassroots level of the economy."

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