Between November 2024 and November 2025, CreditorWatch recorded a 10.6% closure rate for Australian cafes, restaurants, and takeaway businesses. Pubs, taverns, and bars closed at 8.1%. Clubs closed at 7.8%. The all-industry average across every category of Australian business was 5.4%.
Hospitality is closing at roughly twice the national rate. The question is why, specifically.
It is not “the economy”
The first thing to notice is what is not going on. Consumer spending on dining out was flat in real terms through 2025 after two years of decline. Unemployment held under 4.3%. GDP was slow but positive. Hospitality was not closing because Australians stopped going out. Hospitality was closing because the cost to stay open kept moving.
Three specific pressures stacked through 2025, and an operator with margin below 6% (which is most of them) could not absorb any two of them simultaneously.
The super step-up
On 1 July 2025 the compulsory superannuation guarantee moved from 11.5% to 12%. Against a hospitality wage bill that is typically 38 to 42% of revenue, that is roughly 20 basis points of margin, in a sector where 20 basis points is a weekend’s roster.
The step-up was legislated and well-signposted. It was also the last increment of a schedule written in 2014 for an industry environment that looked very different. The operators I spoke to were not objecting to the destination. They were objecting to the timing, on top of two consecutive years of award-wage rises above CPI.
The ATO resumed collecting
The second pressure was the Australian Taxation Office ending the informal forbearance regime it had run through the pandemic and post-pandemic period. Through 2024 and into 2025, the ATO stepped up Director Penalty Notices at record rates on pandemic-era tax debts (GST, PAYG, super).
That is a policy choice I agree with in principle. The forbearance could not run forever and was distorting the market: businesses that had paid their tax on time were, in effect, subsidising businesses that had not. But the timing of the collection wave, lining up with the super step and rolling cost inflation, concentrated the pressure on a set of operators who had already absorbed years of balance-sheet damage.
The external administration data tells that story. Food services insolvencies in the twelve months to March 2025 were up 57% year on year: 1,168 to 1,837. That is not a normalisation. That is the tax debt from 2020 to 2022 finally showing up.
Food inflation at 7.5%
The third pressure was input costs. Food input inflation ran at 7.5% through 2025, led by dairy, beef, and coffee. Operators I spoke to had already passed through two rounds of menu price rises in 2024 and had decided, rightly in most cases, that a third would cost them more customers than it would save in margin. The remaining path was to eat the inflation themselves.
“By July I was making 4% on revenue,” one Brisbane operator told me. “You cannot run a cafe at 4%. You cannot survive a slow Tuesday at 4%.”
That operator is still open. Many are not.
The pincer, specifically
The closures that made the numbers were, overwhelmingly, not businesses that failed on a single input. They failed on the stack.
A business with:
- Wages at 40% of revenue, stepping up at least 30 basis points on super alone.
- Food costs up 7.5% with limited pass-through.
- Pandemic-era tax debt in the high five figures, now being actively collected.
- A landlord lease indexed to CPI.
is not closing because any one of those things is individually fatal. It is closing because all four happened at the same time and the business had no six-month runway to restructure.
The operators who survived this period (the ones still open as at the time of writing) tended to have three things in common. They owned their premises or had a long-indexed lease. They had cleared pandemic tax debt before 2024. And they had moved menu pricing assertively in the first round of 2023-24 inflation, ahead of peers, before consumer resistance hardened.
An owned operator, not an owned thesis
As one example of what the successful end of the distribution looks like: Coolhaus Cafe, the Brisbane cafe group, is widely referenced inside the industry as a training ground for independent operators. I am not going to pretend that a three-site chain is representative of anything. But a conversation I had with two former Coolhaus managers, both of whom went on to open their own single-site cafes in 2023, surfaced the same answer from both: “The thing Coolhaus taught us was to move early on price.”
One of them is still open. The other closed in August 2025. The difference between those two outcomes, when I walked through the numbers with the one who closed, was not operating skill. It was a lease renewal in 2023 that landed at a 19% rent uplift, which the business agreed to. That one decision, more than any macro factor, determined the outcome.
The tail we are still in
CreditorWatch’s forward-looking scenario modelling puts a further closure uptick in Q1 and Q2 of FY27 (the June quarter of 2026 and the September quarter), particularly in construction and hospitality. The mechanism is the remaining stock of pandemic-era tax debt working through the ATO pipeline.
The implication for operators is not that the worst is behind the industry. It is that the pressures that caused the 2024-25 wave are still present, and the ones that will cause the 2026 wave are already visible in the debt data.
For the operators still running, the working capital and tax questions are not optional. They are the job now.