SBR for Restaurants: Recovering from COVID Debt

TL;DR: Restaurants and hospitality businesses carrying $100K-$300K in COVID-era ATO and landlord debt are ideal SBR candidates. Small Business Restructuring typically reduces debts to 20-35 cents in the dollar, with plans paid over 2-3 years. The ATO — often the largest creditor at 40-70% of total debt — votes yes on SBR plans over 90% of the time. ASIC data shows 87% plan approval rate and 93% of businesses still trading post-SBR.

No industry was hit harder by COVID than hospitality. Restaurants, cafes, bars, and venues accumulated massive debts during lockdowns — debts that many are still carrying years later.

If your hospitality business is struggling under COVID-era debt, SBR might be your path to recovery.

The Hospitality COVID Debt Problem in Australia

The numbers tell the story:

• 40% of restaurants took on significant new debt during COVID
• Average COVID debt for hospitality businesses: $100,000-$300,000
• Dominant creditors: ATO (deferred GST, PAYG) and landlords

Many hospitality businesses are now profitable again — but the weight of historical debt makes them unsustainable.

Sound familiar?

Why Restaurants Are Ideal Candidates for SBR

SBR was almost designed for the hospitality situation:

1. Viable Operations, Historical Debt

Most struggling restaurants aren’t bad businesses. They’re good businesses with bad debt from an unprecedented crisis.

2. Clear Cause

COVID is an obvious, documentable, external cause. This isn’t mismanagement — it’s surviving a pandemic.

3. Return to Profitability

Many hospitality businesses are now trading well. Revenue has recovered. It’s the debt that’s killing them.

4. Creditor Understanding

Even the ATO understands COVID’s impact on hospitality. They’re sympathetic to restructuring proposals.

Typical Restaurant Debt Profile: ATO, Landlord, and Suppliers

Typical hospitality SBR cases involve:

ATO Debt

• Deferred GST from COVID periods
• PAYG withholding that couldn’t be paid
• JobKeeper-related adjustments
• Super Guarantee Charge

The ATO is often the largest creditor, holding 40-70% of total debt.

Landlord Debt

• Rent arrears from lockdown periods
• Rent deferrals that came due
• Make-good obligations

Supplier Debt

• Food and beverage suppliers
• Equipment providers
• Service providers

Other

• Finance company debts
• Credit card balances
• Professional fees

How the SBR Process Works for Restaurants

Here’s how SBR typically works for hospitality:

Before SBR

• Revenue has recovered to pre-COVID or higher levels
• Monthly operations are profitable
• But historical debt payments consume all profit
• ATO is sending notices, possibly DPNs
• Landlord patience is wearing thin
• Stress is overwhelming

During SBR (35 Days)

• Appoint restructuring practitioner
• All enforcement stops immediately
• Continue operating normally
• Work with practitioner to develop plan
• Plan proposes 20-35 cents in the dollar
• Creditors vote (ATO usually votes yes)

After SBR

• Make agreed payments over 2-3 years
• Amount is genuinely affordable
• When complete, remaining debt gone
• Business is financially healthy
• Fresh start achieved

Real Hospitality SBR Case Study: CBD Restaurant With $280K Debt

The Setup

Restaurant profile:

• Established CBD restaurant, 8 years trading
• COVID shutdowns created $280,000 debt
• Now doing $50,000/week revenue
• Operating profit: $8,000/week (before debt)
• But debt payments require $12,000/week
• Can’t sustain the gap

Debt breakdown:

• ATO: $180,000 (deferred GST, PAYG)
• Landlord: $60,000 (rent arrears)
• Suppliers: $40,000

The SBR Process

• Restructuring practitioner appointed
• All enforcement paused
• Restaurant continued normal trading
• Plan developed: 30 cents in the dollar
• Payment proposed: $84,000 over 3 years
• ATO voted yes, landlord voted yes
• Plan approved

The Outcome

• Monthly plan payment: $2,333
• Compared to previous $12,000/week demand
• Business cash flow positive
• Stress eliminated
• Plan completed in 3 years
• $196,000 debt eliminated

How Landlords Vote on Hospitality SBR Plans

Landlords are often significant creditors for hospitality businesses. Here’s how they typically view SBR:

Why Landlords Usually Vote Yes

• 30 cents is better than 0 cents (liquidation)
• A trading tenant is better than an empty premises
• Re-leasing costs money and takes time
• The tenant has been reasonable

Negotiating with Landlords

Consider offering:

• Current rent payments continuing
• Longer lease commitment
• Make-good waivers or deferrals
• First-mover advantage on the plan

Landlord Relationship Post-SBR

Many landlords appreciate tenants who address problems proactively. The relationship can actually improve post-SBR because the financial pressure is resolved.

ATO Voting on Hospitality SBR Plans

The ATO has shown particular understanding for hospitality businesses:

COVID Context

The ATO knows hospitality was devastated. They’re not surprised by deferred GST and PAYG from 2020-2022.

Voting Record

The ATO votes yes on hospitality SBR plans at very high rates when the plan offers better returns than liquidation (almost always).

Ongoing Relationship

Post-SBR, the ATO wants you to succeed. A profitable restaurant pays future GST. That’s better than liquidating a failed one.

When to Start SBR: Timing Considerations for Restaurants

Seasonal Factors

Consider timing your SBR around:

• After busy season (December-January) when cash reserves are higher
• Before quiet periods when cash flow is tighter
• When you have evidence of current profitability

Lease Renewals

If your lease is up for renewal, consider:

• Addressing debt before negotiating new terms
• Using SBR to strengthen your position
• Discussing with landlord to align timing

Tax Lodgements

Get lodgements current before starting SBR. The ATO is more supportive when they can see your complete position.

SBR Tips Specific to Hospitality and Restaurant Businesses

1. Document the COVID Impact

Keep records showing:

• Revenue before COVID
• Revenue during lockdowns
• Government support received
• Recovery trajectory

This supports your narrative of a viable business affected by external crisis.

2. Show Current Performance

Provide recent:

• Monthly P&L statements
• POS or revenue reports
• Current trading evidence

Demonstrate that the business works without historical debt.

3. Maintain Operations

During the 35-day SBR process:

• Keep trading normally
• Pay current suppliers
• Maintain quality and service
• Don’t let creditor pressure affect operations

4. Communicate with Key Stakeholders

Consider informing:

• Key staff members (if appropriate)
• Landlord (especially if they’re a creditor)
• Critical suppliers

Managed communication is better than surprises.

5. Plan for Post-SBR

Think about:

• How will you manage cash flow under the plan?
• What operational improvements can you make?
• How will you avoid future debt accumulation?

SBR Eligibility Checklist for Restaurants

Good candidates:

• ✅ Revenue has recovered or is recovering
• ✅ Currently profitable at operating level
• ✅ Debt is primarily COVID-related
• ✅ Total debt under $1 million
• ✅ You want to keep the business

May need more consideration:

• ❓ Revenue still declining
• ❓ Operating losses continue
• ❓ Fundamental model questions
• ❓ Lease about to end with no renewal
• ❓ You’re ready to walk away

SBR and the Post-COVID Hospitality Recovery

COVID created an unprecedented wave of hospitality debt. SBR was introduced just before COVID hit, almost as if the government anticipated needing a solution.

Thousands of hospitality businesses have now used SBR successfully. They’ve eliminated COVID debt, preserved jobs, and continued serving their communities.

If your restaurant survived COVID but is struggling under the debt it created, SBR offers a legitimate, government-backed path forward.

The debt was not your fault. The solution is available. The numbers usually work.

Next Steps for Restaurants Considering SBR

1. Check your eligibility — Pty Ltd, under $1M debt, lodgements current
2. Get your numbers together — Current P&L, debt summary, creditor list
3. Speak with a restructuring practitioner — Many offer free initial consultations
4. Understand your options — SBR isn’t the only choice, but it may be the best
5. Make an informed decision — With proper advice for your specific situation

Your restaurant survived COVID. Now it’s time to recover from it.