Author
Marcus PetrovicDirector & Head of Client Strategy
Cash flow concerns? Tax debt building faster than you can clear it? Plenty of good companies hit a rough patch, and reaching this page means you're already doing the smart thing, looking for a way through.
Small Business Restructuring (SBR) is one of the most director-friendly ways to deal with company debt in Australia. You stay in charge, the business keeps trading, and you put a plan to your creditors to settle what's owed. Below we walk you through how the Small Business Restructuring process works, stage by stage, so you know what to expect and where the ATO fits in along the way.
What is the Small Business Restructuring process?
Small Business Restructuring is a formal process under Part 5.3B of the Corporations Act 2001 that lets an eligible company reduce and repay its debts while the directors stay in control. It was built for smaller companies dealing with financial difficulty, not large corporate collapses.
In short, here's what sets SBR apart:
- You appoint a Small Business Restructuring practitioner (SBRP), who must be a registered liquidator.
- You keep running the business day to day.
- You propose a restructuring plan to pay creditors part or all of what they're owed, over up to three years.
- Creditors vote on the plan, and if they accept, the company trades on under the new terms.
The whole process usually runs to around 35 business days from appointment to the vote. That speed, and the fact that you stay in control, is why many directors choose SBR to save a viable business rather than wind it up.
Who is eligible for Small Business Restructuring?
To use SBR, your company needs to meet a clear set of eligibility criteria:
- Total liabilities of no more than $1 million, not counting employee entitlements.
- An incorporated company, so sole traders and partnerships don't qualify.
- No prior use of SBR or Simplified Liquidation by the company or its directors in the past seven years.
- Tax lodgements up to date and any due employee entitlements paid before the plan goes to creditors.
In practice, most companies that use SBR are modest in size. ASIC found 75% owed creditors less than $600,000 between July 2022 and December 2024. If you've worried your business is too small for a formal process, it isn't. This is exactly the kind of business SBR was built for.
The Small Business Restructuring process step-by-step
The journey moves through a short assessment, two formal phases, then the plan in action. The Small Business Restructuring flowchart below maps the full sequence and the timeframes at each stage.
The assessment
Most directors come to us while juggling cash flow pressure, tax debt, or creditor demands. Before anything formal begins, we sit down with you, look at your numbers, and work out which solution actually fits. Sometimes that's SBR. Sometimes it's Voluntary Administration or another path. We'd rather match the right process to your business than push a one-size answer onto a stressful moment. Financial distress looks different for every business, so we treat yours on its own terms.
Phase 1: Proposal development (20 business days)
This is where your plan takes shape. It runs for 20 business days, with a possible 10-day extension.
- Appoint your restructuring practitioner: You bring us on as your SBRP. We confirm your company is heading toward eligibility and get started.
- Keep trading: You stay in charge of day-to-day operations. We only need to sign off on anything outside the ordinary course of business.
- Notify your creditors: We let all your creditors know about the appointment and explain what it means for them. A moratorium also kicks in, which pauses most enforcement action, including by secured creditors, while we build the plan.
- Build your restructuring plan: We work with you to set out how your debts will be handled, often offering creditors less than the full amount over up to three years.
- Send the proposal statement: Your creditors receive the plan, our assessment, and our recommendation to guide their vote.
How we work with the ATO before submitting your plan
Here's where we go the extra mile. Before we put your plan to creditors, we talk to the ATO first.
This matters because the ATO is usually your majority creditor. ASIC found it was a creditor in 93% of companies with fulfilled plans, taking around $88 million of the $101 million paid to unsecured creditors. So we'd rather know where they stand before your plan is locked in, not after.
We take a proactive approach and work alongside the ATO to strengthen your proposal before it's formally submitted. In practice, that means we:
- Share a draft of your restructuring proposal with the ATO at least 5 full business days before it's due to go to creditors.
- Talk through any concerns and find out what would make the plan stronger.
- Refine the terms together, usually the return to creditors, instalment arrangements, or evidence on how the insolvency arose.
It's the difference between strengthening your plan early and reacting to a knock-back later.
Here's how that played out on one of our matters. The ATO felt a proposed return of about 32 cents in the dollar could be stronger. We reworked it to 38 cents, added more detail on how the business became insolvent, and sorted it all out at the draft stage, well before creditors saw it. That's the whole point of engaging early, giving your proposal the strongest possible chance of approval.
Phase 2: Creditor voting (15 business days)
Once your plan is issued, the decision passes to your creditors.
- Creditors review and vote: Your creditors have 5 business days to contest the recorded debts, then 15 business days to vote. More than half by value of the creditors who vote, related parties excluded, must approve the plan.
- If your creditors accept: You carry on under the restructured terms and start making payments under the plan.
If they don't: You stay in control. You can keep trading, move to Liquidation, or consider Voluntary Administration. Nothing happens automatically, and we'll talk you through your options.
After your plan is approved
Once your plan is locked in, our focus shifts to helping you deliver it. We stay in touch to keep payments on track and your business steady. The plan typically runs for up to three years, and you keep trading the whole time. ASIC found 93% of companies with a fulfilled plan were still registered and trading as at 30 April 2025, which tells you the model works when the groundwork is solid.
What goes into a Small Business Restructuring plan?
A restructuring plan sets out how much creditors will be paid, over what period, and how the practitioner is paid. Most plans share a few common features:
- A proposed return to creditors, paid over up to three years.
- A release from the balance of admissible debts once the plan is complete.
- A fixed fee for the practitioner in the proposal phase, agreed up front, plus a percentage of payments made to creditors.
We'll always agree our fee with you before you commit, so there are no surprises down the track. It's a fair question to ask any SBRP early, and we're happy to answer it.
Small Business Restructuring and your tax debt
A small business debt restructure is often driven by the ATO, simply because it's usually the largest creditor. That's also why the early ATO review carries so much weight.
One point worth being clear on. SBR settles company debt, but it doesn't erase a director's personal liability under a Director Penalty Notice (DPN). If you've received a DPN and the 21-day window has passed, that personal liability stays alongside the company debt. Payments under the plan can chip away at it, though they don't wipe it. Acting early, before a DPN locks down, simply gives you more room to move. Directors carrying tax debt have plenty of company here, and there are clear options on the table.
See how it works in practice
In this short case study, we walk through how we helped one company cut its tax debt by 78% with Small Business Restructuring, from the first conversation to an approved plan.
Talk it through with Mackay Goodwin
If tax debt or creditor pressure is weighing on you, the next step is a straight conversation, not a leap into the unknown. Mackay Goodwin is an ASIC-registered restructuring and insolvency firm working with directors across retail, hospitality, and construction. Our practitioners confirm your eligibility, build the plan, manage the ATO engagement, and stay with you to the final payment.
The first chat is free and confidential. Book a free consultation, and we'll tell you honestly whether SBR is the right move for your business.
FAQs
How long does the Small Business Restructuring process take?
Approximately 35 business days from appointment to the creditors' vote. That's 20 business days to develop the plan (extendable by 10), then 15 business days for creditors to vote.
Does the ATO have to approve the restructuring plan?
Not formally, but its vote usually decides the outcome because it's the majority creditor in most cases. Where the ATO is a major creditor, it's often open to reviewing a draft before submission, which is why we engage with it early.
Can I keep trading during Small Business Restructuring?
Yes. You stay in control and run the business throughout. The practitioner only signs off on actions outside the ordinary course of business.
What happens if creditors reject the plan?
Control stays with you. You can keep trading, propose a Liquidation, or appoint a voluntary administrator. Creditors, including secured creditors, can also resume enforcement action.
Is Small Business Restructuring the same as Liquidation?
No. Liquidation winds the company up and ends trading. SBR keeps the company alive and trading while you repay an agreed portion of the debt.
Last reviewed June 2026. Timeframes and thresholds reflect Part 5.3B of the Corporations Act 2001 and current ATO and ASIC guidance, which can change.
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