Australia could face a “tsunami” of bankruptcies when government support packages and existing capital run dry as a result of COVID-19, a lead financial institution has warned.

Malcolm Howell, bankruptcy trustee and partner at insolvency firm Jirsch Sutherland, forecasts that the majority of these bankruptcies will come in 12 to 18 months time thanks to a delay in the economic impact of coronavirus.

The most at risk, says Howell, are small-business owners who have been forced to use personal finances to prop up their businesses during mandatory shutdowns.

Many businesses have been forced to closed due to the coronavirus pandemic. (Getty)

“Once the government relief measures expire, many SMEs that have deferred their liabilities are likely to receive

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