Insolvency expert Malcolm Howell warns Australians to review festive budgets now before hidden holiday costs create financial distress in 2025.
What’s happening: Australians face significant risk of holiday debt spiralling into 2025, with insolvency experts urging households to review finances before festive spending and tax debts combine. Cost of living pressures and depleted savings buffers mean many enter the season already financially strained.
Why this matters: With household savings ratios at 4 to 5 percent and business related personal insolvencies reaching 29.4 percent, financial strain could intensify dramatically when holiday bills arrive in January. Early action now prevents far bigger problems later.
The festive season brings more than gift wrapping and celebrations. For many Australians, it delivers a financial reckoning that arrives with January’s bills, and this year the risks are particularly acute.
Malcolm Howell, Partner at Jirsch Sutherland, says households and businesses are entering the holidays already financially stretched. According to recent research from Pureprofile, 78 percent of Australians plan to adjust their Christmas spending, with more than half choosing debit over credit cards and most setting tighter festive budgets.
“Many Australians are feeling the strain this year, with rising mortgage repayments, rent and everyday costs,” Howell says. “But while gifts tend to grab the spotlight, it’s the hidden costs of the holidays – from travel and entertainment to dining, groceries and surcharges – that can quietly derail even the best intentions.”
The warning comes as Australian Bureau of Statistics data shows household spending rose 5 percent in August year on year, driven by essentials including housing, groceries and transport. Over the year to August 2025, holiday travel and accommodation costs increased by 1.1 percent, dining by 3.3 percent, and groceries by 3.0 percent, with alcohol and tobacco up 6 percent. These figures highlight how festive expenses extend well beyond traditional gift purchases.
Meanwhile, the household savings ratio has decreased to just 4 to 5 percent, well below pre pandemic levels. This signals that fewer Australians have financial buffers for unexpected costs. When savings are depleted and spending accelerates during the holidays, January becomes a pressure point where optimism can quickly turn to anxiety.
“People relax over the holidays and spend more freely; by late January, optimism can turn to anxiety as bills, buy now pay later repayments and credit card statements roll in,” Howell says. “Taking stock now – setting limits, trimming non essentials and tackling high interest debt early – can relieve enormous pressure down the track.”
The financial strain extends beyond individual households. Business owners face mounting pressures from multiple directions. Howell notes rising business related personal insolvencies, with directors and sole traders whose personal finances become entangled with struggling enterprises.
“We’re seeing a rise in business-related personal insolvencies – directors and sole traders whose personal finances have been dragged down by struggling businesses,” Howell says. “This year has also been marked by a sharp lift in ATO enforcement through Director Penalty Notices, which is bringing business tax debts 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 business failures increasingly translate into personal financial distress.
“When cash flow tightens and debts build up, both the business and the individual are at risk,” Howell says. “Acting early – whether by seeking advice, restructuring debt, or reviewing expenses – can make a real difference.”
The combination of holiday spending and tax debt creates particular vulnerability. Director Penalty Notices allow the Australian Taxation Office to hold company directors personally liable for unpaid taxes, meaning business obligations can directly threaten personal assets. For small business owners already managing tight margins and seasonal fluctuations, the festive period can amplify existing financial pressures.
Jirsch Sutherland recommends several strategies to avoid what it terms Debtmas. Creating a comprehensive spending list that includes gifts, travel, dining and hidden extras like booking fees provides clarity about total costs. Setting a realistic festive budget and maintaining discipline prevents overspending.
Buy now pay later services deserve particular caution. These payment options feel manageable in December but can spiral quickly when multiple repayments converge with January bills. Staying current on essential bills, particularly utilities and credit cards, prevents penalty interest and late fees from compounding financial stress.
For those who consistently overspend, reassessing spending habits and creating accountability mechanisms helps redirect funds toward existing debts. Even small adjustments, like reducing luxury purchases, can create breathing room. Taking on new debt during the festive period should be avoided, as should post holiday sales unless surplus cash is genuinely available.
Keeping a January buffer, even a modest reserve, cushions the impact of post holiday expenses. Most importantly, seeking help before situations become critical makes far more difference than waiting until problems escalate. Conversations with financial counsellors, accountants or insolvency professionals can prevent far larger difficulties.
The broader economic environment adds complexity to individual financial decisions. Business payment defaults remain elevated, insolvencies continue above historical averages, and sectors reliant on discretionary spending face ongoing challenges. These conditions mean that what might have been manageable financial strain in previous years could tip into genuine crisis without careful planning.
For households and businesses entering the festive season, the message is clear. The costs extend beyond obvious purchases, the margin for error is smaller than in recent years, and the consequences of miscalculation arrive quickly in January. Those who take stock now, set realistic limits and address existing debt stand far better chances of avoiding the debt trap that awaits those who spend freely first and count the cost later.
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