Author
David HurstDirector & ASIC Registered Liquidator
The ATO letters have stopped reading like reminders. Two suppliers want payment upfront before the next delivery. You're shifting money between accounts on Thursday to cover wages on Friday, and you've started wondering if the business makes it through the quarter.
You're not alone in this, and you're not out of options.
Small Business Restructuring lets an eligible company propose a plan to pay part of what it owes, keep trading, and keep you in the chair. It's formal, it's fast, and it was built for businesses sitting exactly where yours is.
Mackay Goodwin's ASIC-registered insolvency practitioners have supported Australian business owners under financial pressure for over a decade. This guide draws on that experience to shed light on how Small Business Restructuring works in Australia and the options available to you.
What is Small Business Restructuring?
Small Business Restructuring (SBR) is a formal insolvency process under Part 5.3B of the Corporations Act 2001 that allows an eligible company to propose a restructuring plan for paying all or part of its unsecured debts.
It's designed specifically for incorporated companies (Pty Ltd) with total liabilities under $1 million, up-to-date tax lodgements, and fully paid employee entitlements. It can offer a practical alternative to voluntary administration or liquidation.
Is your company eligible?
Your company may be eligible for restructuring if it meets the appointment rules and can satisfy the plan requirements within the allowed period. Assess if:
- Your business operates through a company.
- The company is insolvent or likely to become insolvent.
- Its total liabilities do not exceed $1 million.
- Required tax lodgements can be brought up to date before the plan is proposed.
- Due and payable employee entitlements can be paid before the plan is proposed.
- The company has not used SBR or the simplified liquidation process during the previous seven years.
- Current and recent directors meet the prior appointment rules.
- The company is not already under restructuring, administration, a deed of company arrangement or liquidation.
The company must meet the main eligibility rules on the day the restructuring practitioner is appointed. However, tax returns and due employee entitlements must be dealt with before the plan goes to creditors. This distinction gives some businesses up to 20 business days to complete outstanding lodgements or payments before proposing the plan.
Benefits and limitations
Small Business Restructuring can bring several benefits, but it also has its limitations.
| Potential benefits | Important limitations |
| Directors remain in control under a debtor-in-possession model. The company can continue trading. Eligible liabilities may be compromised. A moratorium restricts many creditor actions during the restructuring. The process is usually shorter than voluntary administration. An accepted plan gives the company clear payment terms. | Creditors may reject the proposal. The appointment appears on ASIC records as external administration. Secured creditors may retain rights over secured property. Personal guarantees may become enforceable after the restructuring period ends. The company needs enough funding to meet the plan. Reducing debt will not repair continuing trading losses by itself. |
The Small Business Restructuring Process
The Small Business Restructuring process is structured and time-sensitive, with clear steps from appointment through to creditor voting and implementation. Understanding each stage helps directors stay in control and meet key deadlines.
1. Appointing a restructuring practitioner
The directors resolve that the company is insolvent or likely to become insolvent. They appoint an ASIC Registered Liquidator as the Small Business Restructuring Practitioner (SBRP). Only a registered liquidator may act as the restructuring practitioner.
2. Assessing the company
The SBRP reviews the company's records, cash flow, liabilities and eligibility. They also consider if the company can fund a credible proposal and continue trading.
3. Preparing the restructuring plan
The company generally has 20 business days to prepare and propose its plan. The document states what affected creditors will receive and how the company will fund the payments.
4. Creditor voting
Affected creditors generally have 15 business days to respond. Approval requires a majority by value of the affected creditors who submit a vote.
5. Execution and possible outcomes
If approved, the company makes the agreed payments and the practitioner distributes funds to creditors. Once all obligations are completed, the company is released from the eligible debts covered by the plan.
If the proposal is rejected, the restructuring ends. Directors should then promptly assess voluntary administration, liquidation or another suitable pathway.
Which debts are covered?
A restructuring plan generally covers eligible unsecured debts incurred before the SBRP was appointed, such as:
- ATO debt and other eligible tax debts may be included.
- Unpaid supplier invoices may be included.
- Other admissible debts owed to unsecured creditors may be included.
- Secured creditors retain separate rights over their security in many cases.
- Due and payable employee entitlements must generally be paid before the proposal is sent.
- New debts incurred after the appointment are not usually covered.
- Related creditors are excluded from voting as affected creditors.
Can it remove your personal liability?
No, a Small Business Restructure does not automatically remove your personal liability under a Director Penalty Notice (DPN).
DPNs require immediate attention. A standard notice gives you 21 days from the date the ATO issues it to take an available action, subject to the company's reporting history. A successful SBR does not clear a lockdown DPN or a standard penalty that was not remitted within the 21-day period. Though plan payments may reduce the parallel director liability.
During restructuring, a creditor generally cannot enforce personal guarantees against a director, their spouse or a relative without court approval. This moratorium ends once the plan begins or the restructuring otherwise ends.
Directors may also receive protection from insolvent trading liability for qualifying debts incurred in the ordinary course of business during the restructuring. But this does not remove your wider director duties.
Small Business Restructuring is not your only option
A company that does not qualify for SBR may still have a workable path forward.
- Safe Harbour may protect eligible directors while they pursue a better outcome for the company.
- Voluntary Administration may give creditors time to consider a Deed of Company Arrangement (DOCA).
- An informal workout or payment plan may allow you to negotiate with creditors directly.
- The Simplified Liquidation process may provide a lower cost closure pathway for an eligible company.
- A Part IX debt agreement or Part X Personal Insolvency Agreement may help with qualifying personal debts.
The right option depends on the company's financial position, its future cash flow and any personal exposure held by its directors.
Here's a side-by-side comparison:
| Option | Entity type | Publicly disclosed | Best for |
| Small Business Restructuring | Pty Ltd company, total liabilities under $1 million | Yes. ASIC published notices and the company's ASIC record | Viable businesses with ATO or trade debt that can keep trading and fund a plan from future profits |
| Safe Harbour | Pty Ltd company, no debt threshold | No. Nothing is filed with ASIC | Directors pursuing a turnaround who want protection from insolvent trading liability while they do it |
| Voluntary Administration / DOCA | Pty Ltd company, no debt threshold | Yes. ASIC published notices, and "administrator appointed" is added to the company name | Complex companies, or those above the $1 million threshold, that need an immediate stop on creditor action |
| Informal workout or payment plan | Any entity, company or individual | No. It stays between you and the creditors involved | Short-term cash flow gaps where a small number of creditors will cooperate |
| Simplified Liquidation | Pty Ltd company, total liabilities under $1 million | Yes. ASIC published notices, then deregistration | Businesses that aren't viable, where an orderly wind-up beats trading on |
| Part IX or Part X agreement | Individuals only, under the Bankruptcy Act 1966 | Yes, but on AFSA's National Personal Insolvency Index, not ASIC. The listing is permanent | Personal debt and director guarantees, not company debt |
You do not have to face financial distress alone
Mackay Goodwin's ASIC Registered Liquidators support Australian businesses through restructuring, turnaround and formal insolvency appointments. Our team can review your debts, financial records, tax position and eligibility.
Book a free consultation with our team today so we can assess your position, discuss SBR and explain the other pathways available. Early advice gives you more time to assess the company and prepare a workable response.
FAQs
How long does Small Business Restructuring take?
The proposal period generally runs for 20 business days. Creditors then usually receive 15 business days to vote, which means the initial process often takes about 35 business days.
Can a Small Business Restructure be used to resolve ATO debt?
Yes. Eligible ATO debt can form part of the restructuring plan because the ATO is generally treated as an unsecured creditor for those liabilities. The company must still complete its required tax lodgements before proposing the plan.
Do directors stay in control during the restructure?
Yes. Directors continue controlling the company's business, property and affairs. The practitioner's consent is required for transactions outside the ordinary course of business.
What does the restructuring practitioner do?
The practitioner reviews eligibility, checks the company's financial information and assists with the plan. They also report to creditors, manage voting and administer payments after approval.
How long can the repayment plan run?
The plan can set a shorter period based on the company's funding position. However, it cannot require payments on admissible claims more than three years after creditors accept it.
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