More than 19,000 Australian sole traders are carrying tax debts of more than $100,000, according to new figures from CreditorWatch, putting many of the country’s smallest businesses in a high-risk category.
The credit reporting agency says 35,361 businesses had tax debts above the ATO’s $100,000 reporting threshold at the end of June. More than half of them, (19,024 businesses or 53.8 per cent) were sole traders.
The report found businesses with tax debts above $100,000 were 31 times more likely to become insolvent than the national average over the past 12 months. Their average insolvency rate was 21.9 per cent, compared with 0.7 per cent across Australian businesses.
Key points
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19,024 sole traders owe the ATO more than $100,000.
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Those businesses are 31 times more likely to become insolvent than the national average.
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Even one supplier payment default increases insolvency risk more than 10-fold.
Conditions improving but warning signs remain
CreditorWatch CEO Patrick Coghlan says the overall picture looks better than it did a year ago, although the warning signs are becoming harder to ignore.
“The insolvency picture is improving, but the credit data tells us risk is rebuilding,” Coghlan said. “Rising tax debts and payment defaults are often the earliest signs of financial distress, and we’re seeing both move in the wrong direction.”
Overall business insolvencies fell 3.9 per cent during the 2025-26 financial year, helped by earlier income tax cuts and interest rate reductions. Even so, CreditorWatch says businesses are once again falling behind on tax bills and supplier payments.
Late payments prove an issue
One of the report’s biggest warnings is aimed at businesses that start juggling creditors. Even a single trade payment default increases the likelihood of insolvency to more than 10 times the national average over the following year. Multiple payment defaults push that risk even higher.
Coghlan believes many business owners are focusing on growth while missing the financial signals that deserve equal attention.
“In today’s environment, success isn’t just about growth – it’s about visibility. The businesses making decisions based on timely, reliable risk intelligence will have a significant advantage over those relying on hindsight.”
The report points to higher fuel prices, interest rates and ongoing global uncertainty as factors likely to keep pressure on cash flow throughout FY27. Businesses with tight margins or limited pricing power are expected to feel the strain first.
For sole traders, the message is less about panicking over a difficult trading environment and more about acting early. A growing tax debt or late supplier payments can be the first sign that the business needs attention before the problem becomes much harder to solve.
Source: Flying Solo
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