The numbers paint a grim picture. According to the Australian Restaurant & Cafe Association (ARCA), one in nine hospitality businesses went insolvent in 2025. Profit margins have shrunk to razor-thin levels: 2.8 per cent for restaurants and 2.6 per cent for cafes. Wes Lambert, chief executive officer of ARCA, puts it bluntly: ‘Ultimately, when you have inflation at such a high level, consumers have to make a choice. They have to choose paying their mortgages and their bills or dining out.’

The Australian Restaurant & Cafe Association (ARCA) also took the opportunity to oppose the current payroll tax regime, dubbing it a “hidden tax” on super contributions for small restaurants and cafes. ARCA said working holiday makers (WHMs, international students and temporary migrants were an essential and longstanding labour source for Australia’s restaurant and cafe sector, yet the current income tax and super tax settings for temporary visa holders created additional labour costs, workforce uncertainty and administrative burden for small hospitality businesses already operating on thin margins under three per cent. In terms of the “hidden payroll tax”, ARCA said this referred to superannuation contributions tax as employers paid 12 per cent superannuation for WHMs, international students and temporary migrants, but contributions were immediately taxed at 15 per cent.

While the Creditor Watch business risk reports kept getting “worse and worse and worse”, one in nine hospitality businesses went insolvent in 2025, Australian Restaurant & Cafe Association (ARCA) CEO Wes Lambert told news.com.au. Profit margins plummeted to just 2.8 per cent for restaurants, and a measly 2.6 per cent for cafes. “Ultimately when you have inflation at such a high level, consumers have to make a choice,” Mr Lambert said. “They have to choose paying their mortgages and their bills or dining out.”