Does the ATO Actually Approve SBR Plans?

TL;DR: The ATO votes yes on SBR restructuring plans over 90% of the time. They receive 20-40 cents in the dollar through SBR vs 5-10 cents through liquidation, and surviving businesses pay future GST, PAYG, and company tax. Plan approval requires 50%+ of debt by value. Overall SBR plan approval rate is 87% (ASIC Report 810). Key factors: lodgement compliance, realistic projections, and a better-than-liquidation return.

If the ATO is your biggest creditor — and for most small businesses considering SBR, they are — you’re probably wondering: will they actually approve a plan that reduces what you owe them?

The answer might surprise you.

The ATO Approves Over 90% of SBR Restructuring Plans

When the ATO is a creditor in an SBR process, they vote in favour of the restructuring plan more than 90% of the time.

Read that again. The Australian Taxation Office — the creditor most businesses fear — says yes to debt reduction over 90% of the time.

Why? Because SBR aligns with what the ATO actually wants.

Why the ATO Supports Small Business Restructuring Plans

1. They Get More Money Through SBR

In liquidation, unsecured creditors (including the ATO) often receive 5-10 cents in the dollar — sometimes nothing at all.

Through SBR, they typically receive 20-40 cents in the dollar.

The maths is simple: 30 cents is better than 5 cents.

2. Living Businesses Pay Future Taxes

A business that survives SBR will pay:

• Future GST
• Future PAYG withholding
• Future company tax
• Future payroll tax

A liquidated business pays nothing forever. The ATO takes a long-term view.

3. SBR Is Government Policy

The ATO didn’t create SBR, but they support it because it’s government policy designed to help small businesses. Voting against legitimate SBR plans would undermine that policy.

4. They’ve Done the Analysis

The ATO has sophisticated systems to assess restructuring proposals. When a plan offers a better outcome than liquidation (which most do), approval is the logical choice.

What the ATO Looks For in an SBR Plan

To maximise your chances of ATO approval, understand what they’re assessing:

1. Better Than Liquidation

The fundamental question: “Will we receive more through this SBR plan than we would in liquidation?”

Your practitioner will include a liquidation comparison in the plan, showing exactly this.

2. Realistic Projections

The ATO looks at whether your proposed payments are achievable:

• Can the business actually make these payments?
• Are the cash flow projections reasonable?
• Is the business genuinely viable?

Unrealistic plans get rejected.

3. Lodgement Compliance

Are your tax returns and BAS up to date? The ATO is more supportive when they can see your complete tax position.

If you’re behind on lodgements, catching up before or during SBR helps.

4. Future Compliance

Will you stay compliant going forward? A history of missed lodgements and ignored obligations doesn’t inspire confidence.

Demonstrating commitment to future compliance matters.

5. Good Faith Engagement

Has the business engaged genuinely with the process? Or does the SBR look like a last-ditch attempt to avoid legitimate debts?

Genuine engagement = ATO support.

What Can Cause ATO Rejection of an SBR Plan?

While the ATO approves most SBR plans, some factors can lead to rejection:

Phoenix Activity Concerns

If the ATO suspects you’re trying to shed debts only to start a new business with the same activities, they’ll be suspicious. SBR is for genuine restructuring, not phoenix operations.

Director Misconduct

Evidence of director misconduct, illegal phoenix activity, or fraudulent behaviour will count against you.

Poor Compliance History

A long history of non-compliance, ignored warnings, and broken payment plans can reduce ATO support — though it doesn’t automatically mean rejection.

Unrealistic Plan

A plan that proposes payments the business clearly can’t make will fail. If you owe $400,000 and propose paying $20,000 when your business barely breaks even, expect questions.

Preferential Payments

If you’ve paid other creditors while ignoring the ATO, they’ll notice. Preferential treatment of some creditors over others is a red flag.

How SBR Creditor Voting Works

Here’s how ATO voting works in practice:

Step 1: Notification

When the restructuring plan is ready, it’s sent to all creditors — including the ATO.

Step 2: Review Period

Creditors have 15 business days to review and vote. The ATO has internal processes for assessing proposals.

Step 3: Voting

Creditors vote yes or no. For the plan to pass, creditors representing more than 50% of the total debt value must vote yes.

Step 4: Outcome

If the ATO is your largest creditor and votes yes, your plan likely passes. Their vote often determines the outcome.

If the ATO Is Your Largest Creditor in SBR

For many small businesses, the ATO holds the majority of debt (through accumulated GST, PAYG, or company tax). This is actually good news for SBR because:

• If the ATO votes yes (90%+ of the time), your plan likely passes
• You only need majority by value, not number of creditors
• The ATO’s yes can outweigh other creditors’ no votes

Having the ATO as your main creditor can actually simplify the approval process.

Tips to Maximise ATO Approval of Your SBR Plan

Before SBR

1. Get lodgements current Lodge all outstanding BAS and tax returns before starting SBR. Don’t give the ATO reasons to be difficult.

2. Pay recent obligations If possible, stay current on new GST and PAYG while you’re considering SBR. It shows good faith.

3. Document your situation Prepare a clear explanation of how you got into debt. The ATO is more sympathetic to genuine hardship than poor management.

During SBR

1. Be realistic Propose payments you can actually make. Overpromising and under-delivering helps no one.

2. Show viability Demonstrate that your business can survive and thrive with reduced debt. The ATO wants to see a sustainable future.

3. Provide complete information Give your practitioner everything they need to prepare a strong plan. Incomplete information weakens your case.

In the Plan

1. Include a liquidation comparison Show clearly that creditors (including the ATO) receive more through SBR than liquidation.

2. Be transparent Disclose all relevant information. Hidden debts or assets will surface and damage trust.

3. Commit to future compliance The plan should reflect your commitment to staying compliant going forward.

Real-World Perspective

The ATO isn’t your enemy in the SBR process. They’re a pragmatic creditor who wants to recover what they can while supporting businesses that can be saved.

Their high approval rate reflects this. When presented with a legitimate restructuring plan that offers a better outcome than liquidation, they say yes.

Don’t let fear of ATO rejection stop you from exploring SBR. The data shows they’re far more supportive than most business owners expect.

The Bottom Line

• The ATO votes yes on SBR plans over 90% of the time
• They prefer a viable business paying reduced debt over a liquidated business paying nothing
• Good compliance, realistic plans, and genuine engagement help
• Having the ATO as your main creditor can actually help (if they vote yes, you likely succeed)

If ATO debt is crushing your business, SBR offers a legitimate path forward — one that the ATO itself supports.