That is the conclusion of a long-running inquiry into the system by the federal parliament's corporations and financial services committee released on Wednesday.
"Australia's corporate insolvency system is overly complex, difficult to access, and creates unnecessary cost and confusion for both debtors and creditors," the report concluded.
"Tellingly, few parties seem satisfied with the system as it stands."
It said unsecured creditors were frustrated by stubbornly low returns.
Debtors, particularly smaller businesses, regard opportunities for restructure as lacking and system costs as excessive.
And insolvency practitioners and other observers consider the system is not appropriately resourced to achieve its purposes.
The 358-page report made 28 recommendations, calling on the government to commission an independent review of corporate and personal insolvency law.
In the short term, the government should reform the small business restructuring pathway and simplify the liquidation process.
The committee said the Australians Securities and Investments Commission should collect more detailed data so the system could be improved.
The inquiry was told the number of insolvencies was expected to rise to pre-pandemic levels and perhaps beyond, as government emergency support measures were taken away.
Figures released last month showed in each month of the 2022/23 financial year to date, the number of companies entering external administration had increased relative to the same month of the previous two financial years.
Committee chair, Labor senator Deborah O'Neill, said she hoped the report would provide the foundation for reform.
"In just the last 24 hours we've seen news of three construction companies collapse," she said.
"Clearly a review of the principles which govern insolvency law is required in order to improve the effectiveness of interaction between the personal and corporate insolvency systems and provide more equitable outcomes."
In March, Attorney-General Mark Dreyfus met with leaders from the credit, finance, accounting and legal sectors as well as consumer groups to discuss how the federal government can ensure the Bankruptcy Act remains fit for purpose.
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