iscover 
According to credit reporting bureau CreditorWatch’s Business Risk Index, fewer than half of invoices (48 per cent) were paid on time in September, down from 58 per cent a year earlier.
The proportion of invoices more than 60 days overdue has doubled over the past year, rising from 5 per cent to 10.1 per cent, as trade payment defaults and tax debts continue to climb.
CreditorWatch said the deterioration in payment behaviour pointed to growing cash flow pressures across the economy, with small and medium-sized businesses already facing rising costs and weaker consumer demand.
ATO payment defaults up 20 per cent
The pressure is also extending to businesses’ tax obligations, with the number of Australian Taxation Office (ATO) tax defaults in effect reaching 37,577 in September.
That was up 20.7 per cent on a year earlier, with 5,289 additional defaults recorded since January. A total of 2,024 new tax defaults were lodged in September, with new defaults continuing to outpace removals.
“Record ATO tax defaults show many businesses are falling behind on what they owe the tax office, not just their suppliers,” said CreditorWatch CEO Patrick Coghlan.
“Tax debt is often one of the first obligations to slip when cash flow tightens, and if it isn’t addressed it can escalate quickly. With interest rates at their highest level in 15 years and fuel costs remaining elevated, creditors should be keeping a close eye on their exposures,” he said.
The number of business-to-business trade payment defaults also rose 26.1 per cent year-on-year and 5.6 per cent from August, bringing the measure close to a record and almost double pre-pandemic levels.
Coghlan said the latest figures were concerning, as payment delays were another of the first signs of financial stress.
“The September data shows a clear escalation in business cash flow pressure,” Coghlan said.
“Businesses are not just paying a few days later. We’re seeing a growing share of invoices drift into serious delinquency, with one in 10 now more than 60 days overdue.
“That’s a strong warning sign because payment delays are often the first indicator of emerging financial stress.”
Insolvencies expected to rise
Companies entering insolvency for the first time fell to 934 in September, down sharply from more than 1,800 the previous month. However, the August figure included more than 500 companies from the failed Bathla/Universal Property Group.
CreditorWatch chief economist Ivan Colhoun said the outlook remained challenging, with elevated interest rates and fuel prices adding to costs that businesses had faced over the past five years.
“The pressures on Australian businesses continue to build. Official interest rates are now at the highest level for 15 years (though admittedly only 0.25 per cent above the peaks recorded in 2025). High oil and diesel prices add to those pressures, building on the considerable increase in costs that businesses have already experienced over the past five years.
“The high minimum wage and award wage rises granted by the Fair Work Commission this year haven’t helped either,” Colhoun said.
He also pointed to the uneven impact of the artificial intelligence boom, which is lifting demand for semiconductors, memory and commodities such as copper, while the associated data centre construction is adding to wages and materials costs in parts of the building sector.
“The overall result is an increasing divergence in economic performance by industry sector,” Colhoun said.
He said technology, parts of mining and construction, defence, renewables and businesses supplying those sectors were among those benefiting from the current economic environment.
By contrast, businesses carrying high levels of debt, those exposed to interest-rate-sensitive sectors such as residential construction and real estate, and those reliant on discretionary spending were likely to face increasingly difficult conditions.
“It is likely that insolvencies will begin to rise in coming months as a result,” Colhoun said.
Construction and manufacturing among hardest hit
The deterioration in payment times has not been uniform across industries, with construction, manufacturing, transport and hospitality recording significant increases in invoices more than 60 days overdue.
Construction recorded one of the sharpest rises, with the proportion of invoices more than 60 days late increasing from 6 per cent a year ago to 13 per cent in September.
Transport, postal and warehousing recorded a rise from 4 per cent to 12 per cent, while manufacturing and retail trade both increased from 5 per cent to 11 per cent.
Manufacturing’s rate of severe payment delays was up 81 per cent year on year, the sharpest increase of any industry.
Food and beverage services continued to record the weakest payment performance, with 19 per cent of invoices more than 60 days overdue, compared with 10 per cent a year earlier.
CreditorWatch said many industries had also experienced a notable deterioration over the September quarter, pointing to payment pressures building rapidly.
Business lending booms, confidence falls
Business lending is continuing to grow even as confidence among Australian businesses slumps, with rising interest rates, global uncertainty and fuel costs weighing on sentiment.
National Australia Bank’s (NAB) Business Survey, which has tracked business confidence and conditions for more than 20 years, found confidence had fallen to near-historic lows, while business conditions were also well below average.
Rising costs and rising interest rates have squeezed margins, while ATO debt enforcement and regulatory changes, including Payday Super, have added to cash flow pressures.
The strain is also showing up in personal insolvency figures. Business-related personal insolvencies rose 14.4 per cent in FY2025–26 to 4,046 cases, according to the Australian Financial Security Authority.
Yet demand for business finance has continued to build.
A report from the Australian Banking Association (ABA) found 40 per cent of small and medium-sized businesses had sought finance from their bank, while bank credit to businesses reached a record $750 billion in April 2026, up from $567 billion in April 2023.
Major lenders, including CBA, ANZ, NAB, and Judo Bank, have also reported strong growth in their business lending books.
Competition between banks and non-bank lenders has meanwhile pushed the margin on small business loans above the cash rate to a five-year low, according to the ABA.
[Related: Record mortgage broker share raises commercial question]
Want to see more stories from trusted news sources?Make Broker Daily a preferred news source on Google.
