A Guide to Small Business Restructuring in Australia

An overview of Small Business Restructuring and Debt Reductions

You’ll be surprised at the kinds of deals that creditors, including the ATO, are willing to accept through Small Business Restructuring. Recent SBR Plans achieved debt “haircuts” of between 65% to 91% of total debt. In dollar terms the “haircuts” have reduced total debts by $114,000 to $853,000. And the cost of an SBR to achieve those savings was between $5,500 and $33,000.

When was it introduced?

Introduced in 2021, SBR is part of a broader initiative to support small businesses in financial distress, particularly during the COVID-19 pandemic. This reform was part of the Australian government’s response to the economic challenges, which left many struggling to maintain solvency. The new law aimed to provide small businesses with an alternative to traditional insolvency processes, offering a lifeline during a period of widespread economic disruption.

Why was it introduced?

Prior to its introduction, many small businesses were forced to close their doors because of the complexity and cost of existing insolvency processes. By creating a more accessible restructuring option, the government aimed to keep businesses afloat, preserve jobs, and protect economic activity. The reform sought to prevent the unnecessary closure of small businesses and provide the opportunity to restructure their debts, avoid liquidation, and give them a better chance to survive and thrive.

The legislative timeline

The government aimed to provide immediate relief to small businesses, with the development of a long-term solution. The key milestones include:

• September 2020: The government first announced the reform as part of its broader COVID-19 response package aimed at assisting small businesses’ economic recovery.
• November 2020: The legislation was passed by Parliament, officially setting out the legal framework for the SBR process.
• January 2021: The SBR process came into effect, providing small businesses a formal, structured path to deal with insolvency. The timeline reflects the urgency of addressing small business struggles and providing a clear path for recovery.

What are the benefits of SBRs?

The introduction of SBR brought numerous key benefits that helped small businesses tackle financial difficulties while minimising the impact on their operations:

• Cost-Effective: The SBR process is designed to be more cost-effective than other restructuring options, such as Voluntary Administration, making it accessible to businesses that might otherwise struggle to afford the cost of formal insolvency proceedings. This makes it an ideal solution for small businesses that may have limited financial resources.
• Preservation of Business Operations: Unlike liquidation, one of the key advantages of SBR is that it allows businesses to remain operational throughout the restructuring process. This means they can continue generating revenue and preserve jobs.
• Ownership Retention: One of the most significant benefits of SBR is that SBR allows business owners to retain control over the day-to-day operations during the restructuring process, unlike in other insolvency proceedings where ownership may be transferred.
• Simplified Procedure: The SBR process is designed to be less complicated than other formal insolvency options. With fewer formalities and simpler paperwork, business owners can focus on recovery rather than being bogged down by complex procedures. This makes it more accessible for small business owners who may be unfamiliar with complex legal processes.
• Improved Creditor Engagement: The SBR process promotes cooperative relationships between business owners and creditors, as it provides a structured framework for negotiating and agreeing on debt repayment terms. This approach can result in better outcomes for both parties.

These benefits make SBR a vital tool for small businesses seeking a structured, manageable way to address financial distress while protecting jobs and preserving business assets.

The Small Business Restructuring (SBR) Process in detail

The SBR process can be broken down into three key phases, each offering a structured approach to support businesses through their recovery. These phases ensure that businesses have the opportunity to reorganise while minimising any disruption to operations.

1. Pre-Appointment Phase

This phase begins when a small business recognises that it is experiencing financial distress, but before the official restructuring process begins. It allows the business owner to assess the situation and gather the necessary resources for formal restructuring.

• The business owner evaluates the financial situation and considers restructuring as a viable option.
• A restructuring practitioner can provide an initial assessment of the company’s chances of a successful restructuring.
• There is no specific timeframe for this phase, but it generally takes place over a few days to a week, and the process should begin as soon as financial distress is identified.

2. Commencement

The directors of a company can appoint a Restructuring Practitioner and commence a Small Business Restructuring process by making “Resolutions”. That is, there is no Court or creditor involvement in the decision. The company signs a document that resolves:

• that the company is insolvent or likely to become insolvent at some time in the future.
• that the company should appoint a Small Business Restructuring Practitioner.
• a fixed amount of remuneration of the Restructuring Practitioner for the proposal period.

3. The Restructuring Phase

This phase focuses on providing breathing space for businesses to stabilise their operations, working with the practitioner to form a deal to be put to creditors, and, if necessary, form a repayment plan.

• This phase lasts for up to 20 business days, during this time the Directors work with the appointed Restructuring Practitioner (RP) to develop a formal Restructuring Plan. The business is protected by a moratorium, preventing creditors from taking legal or recovery actions. In some cases, the practitioner may apply for an extension of up to 10 additional business days.
• The RP is formally appointed to work closely with the business owner to analyse the business’s financial position and ensure all relevant financial records are gathered, up-to-date, and accurate.
• The business remains operational under the control of directors while the plan is prepared. This ensures minimal disruption to employees, customers, and other stakeholders.
• The plan is flexible and must be practical, achievable, and fair to creditors while ensuring the business has a path to recovery. It is a “debt restructuring” plan at heart and does not usually propose significant changes to the business structure, such as renegotiating debts, extending payment terms, or altering operational strategies.

4. The Proposal Phase

The proposal phase involves presenting the restructuring plan to creditors for approval.

• The business submits a formal restructuring plan that outlines how it intends to repay creditors over time, often including discounts, extended payments terms, or debt forgiveness.
• Once the plan is finished, creditors have 15 business days to vote on the plan. The majority of creditors (by value of those who vote) must vote “yes” for the plan to commence. Upon approval the business proceeds with implementing the agreed terms.
• Creditors vote on the plan, and if accepted by the required majority (at least 50% of value of affected creditors who vote), the plan proceeds. Related party creditors are not entitled to vote.
• If rejected, the company can choose to explore alternative options, such as voluntary liquidation or voluntary administration.

5. The Plan Phase

The final phase begins once the restructuring plan has been accepted by creditors. This phase is focused on solidifying the business’s path to recovery.

• The plan may involve a one-off contribution by the director into a fund, which the RP will distribute to creditors. This ensures a clear, structured repayment method.
• The plans duration cannot exceed 3 years, to help ensure that the repayment process is manageable and provides a clear timeline for the business’s recovery.
• During the plan phase, the business remains under the control of its directors, allowing it to continue operating while implementing the plan. This approach helps the business stay on course while actively working towards recovery and financial stability.

These five phases offer a clear framework for small business to restructure their debts and manage financial difficulties while avoiding liquidation and keeping operations intact. Each phase ensures that the restructuring process is carried out in a clear and structured way, providing the best chance for business recovery.

Ending

When the Plan is completed, the company becomes free from all its pre-restructuring debts, and it can carry on with its business. Therefore, the Small Business Restructuring process ends when:

• the terms of the Plan are completed; or
• the Plan has been terminated because the company did not comply with the Plan terms.

If the Plan is terminated, then all of the company debts that had been frozen become due and payable again. Directors will often consider appointing a liquidator or voluntary administrator.

Post Restructuring

Businesses often engage advisors to strengthen their financial strategies and ensure sustainable growth. It marks a new chapter after completing the SBR process. Here are some suggestions post-restructuring:

1. Debt Relief

Once the plan is completed, the business is released from the debts included in the plan, allowing it to operate without the burden of past financial obligations. Creditors cannot pursue further action against the company for those debts, providing the business with a clean slate.

2. Strengthening Financial Management

Businesses often adopt better financial management practices post-restructuring to avoid slipping again. Restructuring provides a vital opportunity to reassess financial strategies and implement measures that prevent future financial distress. This includes tighter cash flow monitoring, revenue diversification, and improved operational efficiency.

3. Rebuilding Relationships with Stakeholders

Maintaining and restoring trust with stakeholders, including creditors, suppliers, and employees, is crucial to establishing payment terms or credit facilities in the future.

4. Improving Operational Efficiency

Identifying and resolving inefficiencies in the business model to maintain profitability and sustain growth. This includes streamlining workflows and processes, investing in technology to enhance productivity, and training employees to adapt to new operational models.

5. Rebuilding Credit

Reestablishing good credit standing is a priority, as it affects the business’s ability to secure loans, partnerships, or other financial support, making it essential to restore credibility over time.

6. Planning for Growth

With financial stability in place, businesses can focus on strategic planning for growth of market expansion, product or service development, and collaboration that complements business goals.

7. Periodic Evaluation

At last, businesses should be periodically evaluating their performance against recovery goals to ensure sustained progress. This involves reviewing financial metrics, operational outcomes, and stakeholder feedback.

Details of the Restructuring Plan

The restructuring plan is a cornerstone of the SBR process. It outlines the proposal to creditors on how the company intends to repay its debts. Below are the main details included in the plan:

1. Debt repayment offer

The plan specifies the percentage of debts creditors will receive (e.g., cents on the dollar). For example, creditors may agree to a settlement of 25% of debt.

2. Payment structure

Contribution can be made via:

• One-off payments: A lump sum funded by directors, external investors, or asset sales.
• Instalments: Regular payments over an agreed period, typically two but can be up to three years.
• Future profits: Commitments from future revenue streams.

3. Timeline

Defines the timeframe for repayments, ensuring creditors know when they can expect payments, which can extend up to three years.

4. Creditor approval

For the plan to proceed, it must be approved by a majority by a value of affected creditors who vote (related creditors cannot vote).

5. Cost structure

Fees for the RP are usually included in the plan, calculated as a percentage of the amount distributed to creditors.

The plan must be clear, realistic, and demonstrate that it provides a better outcome for creditors than other insolvency options. Once the plan is approved, it binds all creditors, preventing further legal actions related to pre-SBR debts.

What is a Restructuring Plan?

A restructuring Plan is simply the agreement between a company and its creditors. There are no set requirements for a Plan so they can be very flexible. They typically involve a one-off contribution from someone, such as the director, which is paid to creditors by the Restructuring Practitioner. But the Plan could also include contributions from future profits over a period of time or the sale of some assets.

What do I need to do before putting a restructuring Plan to my creditors?

Before you put a restructuring plan to creditors, the practical focus is on getting your information and compliance “house” in order so the Plan can be prepared quickly within the proposal period. In practice, this usually involves:

• Ensuring all due and payable employee entitlements are paid (for example wages, superannuation and leave already taken). Keep evidence of payment.
• Bringing tax lodgements up to date (for example BAS and income tax returns). The debt does necessarily need to be fully paid at this stage, but lodgement must be current.
• Preparing current financial information to support the proposal (for example an up to date creditor list, aged payables/receivables, bank statements, and basic cashflow/budget for the Plan period).
• Identifying the likely funding source of the Plan contribution (director contribution, third party, refinance, future profits, or asset sale) and what timing is realistic.

Where can the funds come from to pay in the Plan?

Often a Plan creates a pool of monies which is applied in full and final settlement of all unsecured creditors. There is no set requirement for where the funds come from. The source could be from the director or a related party, future profits, or a bank refinancing.

Do creditors have to get paid in full from the Plan?

No. A Plan will usually involve creditors receiving a payment from the fund but usually, creditors will not be paid in full. The amount paid under the Plan will vary but the outcome for creditors will usually be set at a level higher than the expected return if the company were to be placed in Liquidation.

What debts are included in the Plan?

The concept is that a line is drawn on the day that the company enters the Small Business Restructuring process. Debts prior to the SBR are “caught” by the Plan. Debts incurred after the day the SBR commences cannot be included in the Plan and must be paid in full as they fall due. The exception is employee entitlements. Employee entitlements that are due must be paid up to date before a Plan can be proposed.

What happens once a Plan is accepted?

Once a Plan is approved, payments are made to an account controlled by the Restructuring Practitioner. The Restructuring Practitioner then calls for details of creditor claims from the creditors. When the amount of creditors is agreed upon, payments are made by the Restructuring Practitioner to the company’s creditors in accordance with the terms set out in the Plan. All creditors are paid the same “cents in the dollar” and all are paid at the same time. When a company pays off its obligations under the Plan, it is released from all claims that were caught by the Plan.

What sort of debt reduction is achievable under a Small Business Restructuring?

Debt reductions vary widely and depend on the business, the available funding, the creditor mix (often including the ATO), and what creditors would likely receive in liquidation. In practice, many approved plans involve creditors receiving a percentage of their debt (often described as “cents in the dollar”). Some plans have proposed outcomes in the range of roughly 9% to 35% to unsecured creditors, but this is not guaranteed and each case turns on its facts.

Are there some examples of recent SBR Plans that have been approved?

The aim of an SBR is for a company to agree on a Plan with its creditors. Here are some recent examples of Plans that have been approved using SBR.

What are the expected outcomes of a Small Business Restructuring?

Initially the company and its directors work with a restructuring practitioner to create a restructuring Plan. That Plan is then put to creditors by the restructuring practitioner and creditors get to vote on whether to accept the Plan. Meanwhile, the business continues to trade under the control of the directors. The restructuring practitioner is responsible for administering the Plan and distributing funds to creditors. The plan is complete when its terms are satisfied. The company is then released from the past debts covered by the Plan.

For the Business

SBR allows businesses to continue operations while addressing their debts. By restructuring, a business can avoid liquidation, maintain employment, and focus on long-term stability. With a tailored plan in place, the business can alleviate creditor pressure and gain the breathing space needed to recover.

For the ATO

The ATO benefits from receiving structured payments that may not otherwise be recoverable if the business fails. Although not in full, this is generally more favourable than what might be achieved through liquidation. SBR also enables the ATO to work collaboratively with businesses to sustain tax compliance and support economic stability.

For Creditors

Creditors gain a clearer path for recovering a portion of their owed funds. The process ensures that creditors are treated equitably, and it can secure better outcomes compared to liquidation, where they may receive minimal returns. SBR expedites debt resolution, enabling creditors to recover funds faster.

For Employees

SBR helps preserve jobs by allowing businesses to remain operational. Employees benefit from the company’s ability to meet wage obligations and maintain stability during the restructuring phase. A successful restructuring boosts employee confidence in the company’s future, improving workplace morale and productivity. A company cannot propose a plan in SBR unless all employee entitlements are paid, so it ensures employees get priority payment.

For Directors

Directors retain control of their business during SBR and get some protection from personal liability whilst adhering to the SBR plan. The process reduces stress associated with creditor actions and allows directors to focus on rebuilding the business. Successfully completing the restructuring plan helps directors maintain professional credibility and demonstrate responsible financial management. Moreover, directors gain the opportunity to rectify past financial missteps and steer the business toward a more secure and profitable future.

What does a Small Business Restructuring process cost?

Costs vary depending on complexity, record keeping, creditor mix (especially where the ATO is a major creditor), and the practitioner’s fee structure. As a board market reference point, ASIC has reported median practitioner remuneration of about $22,000 (in its 2025 review of the regime). Many matters still fall in a similar general range, around $15,000 to $30,000 in practitioner fees, but you should treat any figure as indicative only and obtain a written quote for the fixed fee component. Note that additional costs may arise for third party professionals (such as bookkeepers, accountants or lawyers) if the company’s records need work before a plan can be prepared.

Is Small Business Restructuring popular?

Uptake has increased significantly since SBR commenced in 2021. ASIC’s 2025 review of the regime reported strong growth in appointments over the period it examined. In practice, increased ATO debt collection activity has also been a common trigger for directors to explore SBR as an option, particularly where tax debts are the largest creditor balance.

If a company has a large ATO debt, is SBR a good solution?

It can be, especially where the ATO debt is a large part of the creditor mix and the business is otherwise viable. Outside a formal insolvency process, negotiating with the ATO will commonly involve a payment arrangement where the ATO expects the underlying tax debt to be paid in full, often with interest and ongoing compliance requirements. The maximum term and conditions of any ATO payment arrangement can vary depending on the circumstances and ATO policy at the time. By contrast, an SBR plan can run for up to 3 years and may involve a compromise of unsecured debts if creditors approve it.

Why is an SBR better than a Payment Arrangement with the ATO?

Does an SBR avoid a 21-Day Director Penalty Notice from the ATO?

Potentially, but it depends on the type of Director Penalty Notice (DPN) and whether the underlying tax returns were lodged on time. In the case of an issued non-lockdown DPN, directors can avoid personal enforcement if the company takes a qualifying step within the 21-day period, which can include appointing an SBR practitioner if the company is eligible. For a lockdown DPN, typically where amounts were not reported by the due date, starting SBR will not remit the director penalty. Directors should get urgent advice as soon as a DPN is received.

Is the ATO supportive of Small Business Restructurings?

Yes. The ATO is often a major creditor in SBRs, so its vote can be influential. In its public guidance, the ATO says generally supports an eligible company’s restructuring plan where the plan is likely to result in a higher return to creditors within a reasonable period than would be received if the company were wound up, and where there are no public interest concerns. However, the ATO will not support every plan, and it commonly expects detailed supporting information and evidence that the offer represents the best available outcome.

Does the ATO actively participate in Small Business Restructuring process?

Yes. The ATO regularly participates as a creditor in SBRs and will typically review the plan supporting material. Where the ATO is a major creditor, it may ask questions or request further information through the practitioner, and it may provide feedback on a draft plan if provided early enough. The ATO indicates it should receive a draft and supporting information no later than 5 full business days before the plan is issued to creditors.

Eligibility for a Small Business Restructuring

SBR offers a valuable process for businesses facing financial distress to recover while minimising the risk of liquidation. To qualify for an SBR, a company must meet specific criteria that determine its eligibility.

Who is eligible for an SBR?

To be eligible for Small Business Restructuring, a company must be able to declare that:

• The company is insolvent or about to become insolvent
• The company’s total liabilities, admissible debts or claims, do not exceed $1 million on the day it enters the process (as calculated under the legislation). Employee entitlements are treated differently under the rules, and due and payable employee entitlements must be paid before a plan can be proposed.
• None of its directors has been a director of another company that has gone through another Small Business Restructuring or a Simplified Liquidation process within the last 7 years

To be eligible to propose a plan (up to 20 business days into the process), the company must also be:

• Up to date with all tax lodgements and
• Able to pay all due and payable employee entitlements

If the company is behind on either point it needs to get them up to date before proposing a Plan.

What is a “Small Business”?

In everyday language, “small business” can refer to a business with relatively low turnover and/or a small number of employees. However, for SBR eligibility, the key tests are set by the legislation, including that the entity is an incorporated company and the liabilities threshold is met. The turnover/employee figures below are general descriptors only and are not the legal eligibility test for SBR.

• Less than $10 million annual turnover
• Less than 20 full-time employees

Note these are guidelines for definition and not eligibility requirements for the SBR process.

How do I know if my company is insolvent and needs a SBR?

A company is regarded as insolvent when it is not able to pay all of its debts when they become payable. There are a lot of warning signs that a company is insolvent. Very commonly the most prominent warning sign is a large unpaid tax debt. Other signs can include ongoing losses, cashflow problems, overdue tax lodgements and difficulty gaining access to new credit.

How often can a business use Small Business Restructuring?

A business or director of a business can only access the SBR process once every seven years. This restriction is in place to ensure that the process is used as a genuine means of recovery, not repeatedly for financial relief. Upon completing the SBR process, the business must wait for seven years to reapply for another SBR.

What is a Small Business Restructuring Practitioner?

A Small Business Restructuring Practitioner is often referred to as an SBRP. It is a new class of Insolvency Practitioners, charged with the role of administering the Small Business Restructuring process. This person must be registered with ASIC as a “registered liquidator”.

Who can be a Small Business Restructuring Practitioner?

A Small Business Restructuring Practitioner must be a Registered Liquidator. Of course, Restructuring Works has several Registered Liquidators who can act as SBRPs.

Does the Small Business Restructuring Practitioner need to be independent?

Yes, an SBRP must be “independent”. This means that someone “connected” to the company cannot seek to be appointed as its SBRP. A “connected individual” includes someone who:

• has a debt of more than $5,000 owing to the company
• is a creditor of the company for more than $5,000
• is a director, senior manager, secretary or employee of the company
• is an auditor of the company.

What is the role of the Small Business Restructuring Practitioner?

The Small Business Restructuring Practitioner assists in debt restructuring whilst the company’s directors remain in control of the business. During the Small Business Restructuring process, the SBRP:

• assists the company in preparing its restructuring Plan and restructuring proposal statement
• circulates the restructuring Plan and restructuring proposal statement to creditors
• certifies to creditors that they believe the company is eligible for restructuring and that the company is likely to be able to meet its obligations under the Plan
• manages the disbursement of payments to the company’s creditors based on the terms set out in the Plan.

What qualifications do Small Business Restructuring Practitioners have?

SBRPs must be Registered Liquidators. To get registered as a Registered Liquidator, they must possess suitable experience, knowledge and abilities, and have their registration granted by an independent committee convened by ASIC. A new classification of Registered Liquidator can take on the role of Restructuring Practitioner only. They are required to be recognised accountants who have demonstrated the capacity to perform the functions and duties of the role.

How will I know if a Small Business Restructuring Practitioner is registered?

The ASIC website keeps a list of Registered Liquidators. That list can be found on the ASIC website under “Search Our Registers” then “Professional Registers”. Of course, RestructuringWorks has a number of Registered Liquidators who can act as SBRPs.

Can more than one person be appointed as an SBRP to a company?

Yes, it is often just one, but two or more Restructuring Practitioners may be appointed to act. Two or more is often referred to as a “joint and several” appointment.

What effect does the appointment of an SBRP have on creditors?

The primary purpose of a Small Business Restructuring is so that a company can deal with its creditors and change their rights. That could be to reduce the amount owing or change the terms of payment or both. As a result, the Small Business Restructuring process has a significant effect on creditors. Creditors fall into various classes and the effect is different for each.

What is the effect of a Small Business Restructuring on ordinary creditors?

While the company is in restructuring, ordinary unsecured creditors cannot begin or continue their claims against the company without the Restructuring Practitioner’s consent or the court’s permission. That is, any legal actions against the company are paused whilst the Small Business Restructuring process is ongoing.

What is the effect of an SBR on a creditors’ winding-up process?

Sometimes the situation will arise that a creditor has already commenced a legal action against a company. If that legal action has progressed to the stage of an application to the courts to have the company wound up, that is, to have a liquidator appointed, then the company can seek to have the action adjourned whilst the Small Business Restructuring proceeds. The court can consider what to do. Usually, if the court is satisfied that it is in the interests of the company for it to continue under the Small Business Restructuring process, then the restructuring will continue rather than winding up the company.

What is the effect of a Small Business Restructuring on secured creditors?

A secured creditor is usually a bank or financier that has security over same or all of the company’s assets. In an SBR, the restructuring plan typically compromises unsecured debts, and a secured creditor is generally not required to give up its security unless it agrees. During the restructuring proposal period, a secured creditor’s ability to enforce its security, e.g., selling secured property or appointing a receiver, is generally restricted unless the Restructuring Practitioner gives written consent or the court grants leave. If the secured debs exceeds the value of the secured assets, the shortfall may be treated as an unsecured claim and dealt with under the plan.

How do creditors vote on a restructuring Plan?

The Restructuring Practitioner oversees the voting process. The Restructuring Practitioner provides creditors with the restructuring Plan and proposal statement. When the Plan is put to creditors, they have 15 business days to vote to accept or reject the Plan. During this time, creditors also seek to correct errors in the amount they are owed. A Plan is accepted if more than 50% of the creditors by value (so not in number) that vote, vote to accept the plan. Related party creditors are not entitled to vote on a restructuring Plan.

What will creditors consider in accepting a restructuring Plan?

A variety of documents are provided to creditors to help them consider the proposed Plan. The Restructuring Practitioner will provide:

• the company’s restructuring Plan
• the restructuring Plan standard terms
• the company’s restructuring proposal statement
• a declaration from the Restructuring Practitioner about whether the eligibility criteria for restructuring are met and whether the company is likely to be able to meet its obligations under the Plan
• a statement about the completeness of the information set out in the company’s restructuring Plan

The Restructuring Practitioner will also ask the creditor to:

• vote yes or no to the Plan
• advise if creditors agree with the amount of their claims as listed and, if not, provide information on the amount they say they are owed.

How are secured creditors impacted?

Secured creditors, often banks or finance companies, have security over some or all of the company’s assets. In an SBR:

• a secured creditor is generally not required to give up its security under the restructuring plan unless it agrees. In other words, the plan typically compromises unsecured debts, not a secured creditor’s rights against its collateral.
• During the restructuring proposal period, a secured creditor’s ability to enforce its security (e.g., appointing a receiver or selling secured assets) is generally restricted unless the Restructuring Practitioner consents or the court gives leave (the exact position depends on the circumstances).
• If a secured creditor is owed more than the value of its security, the shortfall may be treated as an unsecured claim and dealt with under the plan.
• In practice, secured creditors will look closely at cash flow, trading performance, and whether the proposal gives them a better outcome than enforcement or liquidation.

How are related creditors impacted?

Related creditors, such as business partners, family members, or affiliates of the business are not permitted to vote on the restructuring plan like other creditors.