Frequently Asked Questions — Small Business Restructuring (SBR) in Australia

Small Business Restructuring is a government-backed process introduced in January 2021 that allows eligible Pty Ltd companies with debts under $1 million to restructure their debts while the directors remain in control of the business. It's designed to help viable businesses recover from financial distress without going into liquidation.

To be eligible for SBR, your business must be a Pty Ltd company with total liabilities under $1 million. Your tax lodgements must be up to date (or close to it), you cannot already be in liquidation or external administration, and no director can have used the SBR process in the past 7 years.

Based on ASIC data, businesses typically see debt reductions of 60-80% through SBR. However, the exact amount depends on your specific circumstances and what creditors will accept. The proposed payment must offer creditors a better return than they would receive if the company went into liquidation.

According to ASIC Report 810, the median cost for the restructuring phase is approximately $16,137, with an additional median cost of $6,739 for the plan administration phase. Total costs typically range from $15,000 to $30,000, which is significantly less than voluntary administration (often $50,000+).

The initial restructuring phase takes 20 business days, followed by 15 business days for creditors to vote on the proposed plan. If approved, the plan can run for up to 3 years. Most businesses know within 5-6 weeks whether their plan has been accepted.

Yes, one of the key benefits of SBR is that directors retain control of the business throughout the process. Unlike voluntary administration, you continue to run day-to-day operations while working with the restructuring practitioner to develop a plan.

Employee entitlements are protected during SBR. Outstanding wages, superannuation, and leave entitlements cannot be reduced as part of the restructuring plan. Your employees continue to work as normal, and their jobs are generally preserved if the business continues trading.

The ATO has shown strong support for SBR, approving over 90% of plans where they are a creditor. The ATO recognises that receiving a reduced payment through SBR is often better than receiving nothing through liquidation. However, your tax lodgements must be up to date for the ATO to support your plan.

In liquidation, the company is wound up, assets are sold, and the business ceases to exist. Directors lose control, and you cannot trade. In SBR, your business continues operating, you remain in control, and you have the opportunity to reduce debts and recover. SBR is about saving the business; liquidation is about ending it.

Both are formal insolvency processes, but SBR is simpler, faster, and cheaper. In voluntary administration, an external administrator takes control of the business. In SBR, directors retain control. SBR typically costs $15,000-$30,000 versus $50,000+ for VA, and the process is much quicker.

Yes, appointing a restructuring practitioner can stop the enforcement of Director Penalty Notices. The 21-day DPN window provides an opportunity to enter SBR, which halts ATO enforcement action and protects directors from personal liability for company tax debts.

According to ASIC data, construction businesses make up 27% of all SBR appointments, followed by hospitality and food services at 23%. Other common industries include retail, trades (plumbers, electricians), and transport. These industries often face cash flow challenges that make SBR particularly suitable.

If creditors reject the plan, directors should move quickly to an alternative pathway such as targeted renegotiation, voluntary administration, or liquidation depending on viability and creditor pressure. Speed matters because delays usually reduce available options.

Secured creditors may be affected depending on the debt structure and security position, but their rights can continue in some circumstances. These debts need careful treatment in the plan and often require early negotiation.

Generally no. SBR is a company process and does not automatically extinguish all personal guarantee liabilities. Directors should obtain specific advice on personal exposures alongside any company restructure.

Lodgement compliance is a core eligibility requirement. If lodgements are behind, rectification is usually needed urgently before or during early planning so the process can proceed properly.

Impacts vary by creditor and supplier, but many businesses maintain key trading relationships when communication is structured and the plan is credible. Compared with liquidation, SBR generally provides a better platform for preserving commercial continuity.

There are restrictions on repeat use by directors within a defined period. Eligibility should be checked early with a practitioner based on your exact prior appointments and corporate history.

Common alternatives include ATO payment plans, informal workouts with creditors, voluntary administration, and liquidation. The right pathway depends on debt complexity, viability, and urgency.

Immediately. Enforcement actions can escalate quickly and reduce flexibility. Early action usually preserves more options and improves outcome quality.