Officials from Australia's corporate watchdog told a parliamentary inquiry into the cost-of-living crisis that 11,053 businesses entered external administration in the 2023/24 financial year.
ASIC commissioner Kate O'Rourke said while the proportion of businesses going into administration was not the highest, the past year had the most overall.
"The highest number in terms of proportion remains 2011/12 ... Â the number we've got now is the highest number, but we've got more companies," she told the inquiry on Friday.
Of insolvency reports provided to the watchdog in 2023/24, 53 per cent cited inadequate cash flow as one of the causes, along with poor strategic management and trading losses.
Just under 10,000 personal insolvencies were also reported to the watchdog, well down on the 10-year average of 21,252.
The small business and family enterprise ombudsman Bruce Billson said inflation was causing distress among the owners of companies.
He said many businesses had been facing issues due to customers being more cautious with their spending.
"There's no substitute for customers if you're running a business, and what's happening with people being more discerning in terms of their household expenditure... they're not spending as much," he said.
"The customers are coming, but they're not spending as much."
Mr Billson said inflation had also passed on direct costs to the businesses, adding to the pressure.
"Lots of tenancy arrangements are adjusted by CPI, so you could find yourself in a difficult climate," he said.
"Nearly half of all small business loans are secured by a residential property, most often someone's home. So it's not just about a livelihood, it's their life."
The inquiry's chair, Liberal Senator Jane Hume, said the insolvency levels among businesses was alarming.
"Businesses in all sectors were telling us that combination of stringent industrial relations reforms and red tape that comes with that are costing them dearly," she told reporters in Canberra.
"It's preventing them from putting on more employees and taking away from the time that they can spend working within their businesses."
