How The ATO Votes on SBR Plans
The ATO is the largest creditor in most Small Business Restructuring cases. Their vote often determines whether a plan succeeds or fails. Here's how they decide.
The ATO Dominates Most SBR Cases
Understanding the ATO's role as a creditor is critical to understanding SBR outcomes.
Largest Creditor
The ATO is the largest unsecured creditor in the vast majority of SBR cases. Their debt typically comprises PAYG, GST, SGC, income tax, and accrued GIC.
Votes by Value
SBR plans are approved by a majority in value of creditors who vote. Because the ATO often holds 50%+ of voting debt, their single vote can decide the outcome.
Determines Outcome
In practical terms, if the ATO votes no, the plan almost always fails. Preparing a plan that addresses ATO concerns is the single most important success factor.
What the ATO Looks For in an SBR Plan
The ATO evaluates four key areas when deciding how to vote on a restructuring plan.
Compliance History
All BAS, PAYG, and income tax lodgements must be up to date before the plan is proposed. The ATO will not vote yes if there is a lodgement backlog.
Better Return vs Liquidation
The plan must demonstrate that creditors receive more than they would in a liquidation scenario. This is the single most important factor.
Business Viability
Evidence that the business can trade profitably going forward and meet future tax obligations on time.
Director Conduct History
The ATO considers whether directors have a pattern of non-compliance or phoenix activity. Clean conduct history strengthens the case significantly.
The ATO is usually assessing credibility, not just percentages
A stronger dividend helps, but it is rarely enough on its own. In practice, the ATO wants evidence that the company has become compliant, understands why the debt built up, and can avoid falling straight back into arrears after approval.
Fix the compliance story first
Outstanding lodgements and messy records can undermine an otherwise workable proposal.
Show how the business will stay current
Cash flow discipline and future tax compliance matter as much as the compromise itself.
Treat the plan like a proof package
Clear assumptions, liquidation comparisons, and credible practitioner presentation all help the vote.
ATO Voting Patterns
The ATO is pragmatic, not punitive. They generally support plans that offer a better return than liquidation and demonstrate future compliance.
| Scenario | ATO Position | Likelihood |
|---|---|---|
| Better return than liquidation + future compliance demonstrated | Strong support | Very likely to vote yes |
| Marginal return improvement but strong viability evidence | Conditional support | Likely to vote yes |
| Good return but lodgement backlog unresolved | Likely opposition | Will usually vote no |
| Poor return and history of repeated non-compliance | Opposition | Will vote no |
The ATO votes in favour of SBR plans over 90% of the time when they are the major creditor and the plan is well-prepared.
How to Maximise Your Chance of ATO Approval
These actions directly influence the ATO's voting decision on your SBR plan.
- Lodge everything before appointment — BAS, PAYG, income tax returns, and SGC statements must be current
- Show genuine viability with a 13-week cash flow forecast and evidence of profitable trading
- Offer a meaningful return that clearly exceeds the estimated liquidation dividend
- Demonstrate changed behaviour — explain what caused the debt and what has changed
- Engage a practitioner early so the plan is well-prepared and professionally presented
- Maintain current compliance during the restructuring process itself
ATO-Specific Debt Types in SBR
All of these ATO debt types can be included and compromised in an SBR plan.
PAYG Withholding
High priorityTax withheld from employee wages. This is held on trust and the ATO treats it seriously — directors face personal liability via DPNs.
GST
High priorityGoods and Services Tax collected but not remitted. Like PAYG, this is considered trust money and carries DPN exposure.
Superannuation Guarantee Charge (SGC)
High priorityUnpaid employee superannuation plus interest and administration fees. SGC debt carries strict DPN rules.
Income Tax
Standard priorityCompany income tax assessments. While serious, these do not carry the same trust obligations as PAYG and GST.
General Interest Charge (GIC)
Accruing dailyInterest accrued on all overdue ATO debts. Note: GIC is no longer tax-deductible from 1 July 2025.
How DPNs and SBR Voting Interact
Director Penalty Notices add complexity to the SBR process. Understanding the interaction is essential.
DPN issued before SBR appointment
SBR can still proceed. Appointing a restructuring practitioner within 21 days of a standard DPN satisfies one of the safe harbour options.
Act within the 21-day window to preserve options.
Lockdown DPN (lodgements 3+ months late)
Lockdown DPNs cannot be resolved through SBR alone. Directors must pay the debt, enter liquidation, or enter VA. SBR does not satisfy a lockdown DPN.
Lodge overdue returns immediately to prevent lockdown DPNs on future debts.
DPN issued during SBR process
The ATO generally pauses enforcement while a restructuring is underway, but this is discretionary, not guaranteed.
Communicate proactively with the ATO through your practitioner.
ATO and SBR by the Numbers
93%
of SBR companies have ATO debt
ASIC Report 810
26,000+
DPNs issued in FY24
ATO Annual Report
90%+
ATO vote-yes rate when major creditor
Industry data
Jul 2025
GIC no longer tax-deductible
Treasury Laws Amendment
Prepare for ATO Approval
Check your eligibility and get connected with a practitioner who understands how to present plans the ATO will support.
Check Your Eligibility