What’s happeningAustralians face a significant risk of holiday debt rising in 2025, with insolvency experts urging households to review their finances before festive spending and tax debt mix. Pressure on the cost of living and depleted savings buffers means that many are already putting financial pressure on the season.
Why this mattersWith a household savings rate at 4 to 5 percent and business-related personal bankruptcies at 29.4 percent, financial pressures could increase dramatically as the holiday bills arrive in January. Early action now prevents much bigger problems later.
The holidays bring more than just gift wrapping and celebrations. For many Australians, it brings a financial reckoning that appears with January bills, and this year the risks are particularly acute.
Malcolm Howell, partner at Jirsch Sutherland, says households and businesses are already financially stressed heading into the festive season. According to recent research from Pureprofile, 78 percent of Australians plan to adjust their Christmas spending, with more than half preferring debit cards to credit cards and most having stricter festive budgets.
“Many Australians are feeling the pressure this year, with rising mortgage repayments, rent and everyday costs,” Howell said. “But while gifts tend to take the spotlight, it’s the hidden costs of the holidays – from travel and entertainment to food, groceries and fees – that can quietly derail even the best intentions.”
The warning comes as Australian Bureau of Statistics data shows household spending rose 5 per cent year-on-year in August, driven by essentials such as housing, groceries and transport. Over the year to August 2025, holiday travel and accommodation costs rose by 1.1 per cent, dining costs by 3.3 per cent and grocery shopping costs by 3.0 per cent, while alcohol and tobacco rose by 6 per cent. These figures show how festive spending extends far beyond traditional gift purchases.
Meanwhile, the household savings rate has fallen to just 4 to 5 percent, well below pre-pandemic levels. This indicates that fewer Australians have financial buffers for unexpected costs. As savings dwindle and holiday spending increases, January becomes a pressure point where optimism can quickly turn to anxiety.
“People relax and spend more freely during the holidays; optimism may turn to anxiety in late January as buy-now, repayment-later and credit card statements arrive,” says Howell. “Taking stock now – setting boundaries, getting rid of non-essentials and tackling high-interest debts early – can relieve the enormous pressure on the trajectory.”
The financial pressure extends beyond individual households. Entrepreneurs are faced with increasing pressure from multiple directions. Howell is seeing an increasing number of business-related personal bankruptcies, involving directors and sole proprietors whose personal finances become entangled in struggling businesses.
“We are seeing a rise in business-related personal bankruptcies: directors and sole proprietors whose personal finances have been affected by troubled businesses,” says Howell. “This year has also been marked by a sharp increase in ATO enforcement through penalty notices by directors, pushing corporate tax liabilities into the personal arena.”
Australian Financial Security Authority statistics for the September quarter show that almost one in three personal insolvencies, 29.4 percent, are now business-related. This represents a significant shift in the insolvency landscape, where corporate failures increasingly translate into personal financial problems.
“When cash flow tightens and debt piles up, both the company and the individual are at risk,” Howell says. “Taking action early – whether it’s seeking advice, restructuring debt or reviewing spending – can make a real difference.”
The combination of holiday spending and tax debt creates special vulnerability. Director Penalty Notices allow the Australian Taxation Office to hold company directors personally liable for unpaid taxes, meaning business liabilities can pose a direct threat to personal assets. For small business owners already dealing with tight margins and seasonal fluctuations, the festive season can add to existing financial pressures.
Jirsch Sutherland recommends several strategies to avoid what he calls debt. Creating a comprehensive expense list that includes gifts, travel, dining and hidden extras such as booking fees provides clarity on the total costs. Drawing up a realistic party budget and maintaining discipline prevents overspending.
Buy now, pay later services deserve special caution. These payment options seem manageable in December, but can quickly increase if multiple repayments coincide with January bills. Staying on top of essential bills, especially utilities and credit cards, will help prevent late fees and late payments from adding to financial stress.
For those who consistently overspend, reassessing spending habits and creating accountability mechanisms helps direct money back to existing debt. Even small adjustments, such as reducing luxury purchases, can provide breathing space. Taking on new debt during the holidays should be avoided, as well as after the holidays, unless there is actually excess money available.
Maintaining a January buffer, even a modest one, will soften the impact of post-holiday spending. Most importantly, seeking help before situations become critical makes much more of a difference than waiting for problems to escalate. Discussions with financial advisors, accountants or insolvency professionals can prevent much bigger problems.
The broader economic environment adds complexity to individual financial decisions. Corporate defaults remain high, insolvencies are still above historical averages and sectors that rely on discretionary spending face continued challenges. These circumstances mean that what could have been manageable financial tensions in previous years could spiral into a real crisis without careful planning.
For households and businesses heading into the holidays, the message is clear. The costs extend beyond obvious purchases, the margin for error is smaller than in years past, and the consequences of a miscalculation come quickly in January. Those who take stock now, set realistic limits and tackle existing debt will have a much better chance of avoiding the debt trap that awaits those who spend freely first and count the costs later.
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