Author
Marcus PetrovicDirector & Head of Client Strategy
In this episode of the MG Academy Podcast, Marcus Petrovic is joined by Gary Busby, Senior Insolvency Advisor at the ATO, alongside Mackay Goodwin CEO Domenic Calabretta and Insolvency Supervisor Katherine Hines, to unpack the ATO's assessment approach, the most common reasons proposals are rejected, and what practitioners and directors can do to improve their chances of approval.
The ATO's general approach to assessing SBR plans
Gary is direct about the ATO's position. The ATO will generally support a restructuring plan that provides a higher return to creditors within a reasonable time frame than would be achieved in a winding up, so long as there are no overriding public interest concerns. But that does not mean the ATO will automatically vote in favour of every plan that offers more than a liquidation return.
Where the ATO has concerns that a company may be trying to obtain an unfair advantage over other businesses through the conduct and actions of its directors, it will not support the plan. This includes situations where a business has effectively used non payment of tax as a competitive advantage, trading at lower margins or undercutting competitors because it was not meeting its tax obligations while others in the same industry were.
Compliance: what good looks like and what does not
Compliance is one of the key factors the ATO weighs when assessing a plan. That means lodging activity statements on time and making regular payments. A history of late lodgements combined with little or no payment over a prolonged period will count against a proposal.
Marcus raises a point he sees regularly: directors blaming their accountants for poor compliance. Gary's response is clear. The ATO wants to see evidence, not excuses. If a director is claiming they have changed their approach, the ATO wants to see that reflected in recent behaviour, such as switching from quarterly to monthly reporting and demonstrating consistent on time lodgement. Simply stating that things will be different going forward is not enough.
The message for directors is equally straightforward. Not lodging because you cannot pay is counterproductive. The ATO cannot work with you if it does not know where you stand. Lodge on time, report accurately, and engage early if you are having difficulty making payments.
Director loans: the most common red flag
Gary identifies three main reasons plans are rejected. The most prominent is director loan accounts or loans to related entities. If money has been drawn from the company while the tax debt was accruing, the ATO expects the plan to address that gap.
A director loan is not automatically fatal to a proposal. What matters is how the plan deals with it. If the plan acknowledges the loan and includes a contribution that compensates for the shortfall it created, the ATO will consider it. But if the loan is material and the plan ignores it or offers no explanation, that will attract close scrutiny. Domenic adds that many directors claim their withdrawals were Division 7A loans, but when asked for the documentation, it does not exist.
Gary explains the underlying problem. When a director takes money via a loan rather than wages, it sits on the balance sheet as an asset rather than appearing in the profit and loss as a cost. That means there are no on costs for super, payroll tax or workers compensation. The director gets a distorted view of how the business is performing. It only unravels when the business starts losing money and the loan can no longer be offset against a distribution.
Superannuation, SGC and the eligibility trap
Superannuation continues to trip up directors and practitioners. To qualify for an SBR appointment, the million dollar debt threshold excludes employee entitlements, but any outstanding entitlements including super must be paid before the restructuring plan is sent to creditors. If superannuation was paid late, even by a single day, it must be processed through the ATO's Superannuation Guarantee Charge framework. That means lodging an SGC statement, which the ATO recommends be done via an Excel spreadsheet to speed up processing.
Gary notes that one of the common issues the ATO sees is a lack of communication between the director, their tax agent and the restructuring practitioner. The practitioner may be told that super is all sorted when it has not actually been processed. This creates last minute problems close to the voting deadline that could have been avoided with earlier engagement.
Importantly, if super contributions have been paid directly to the fund but late, those payments can be included as a late payment offset when lodging the SGC statement. And while the SGC amount itself, including the nominal interest and admin fee, must be paid for the plan to proceed, any Part 7 penalties or general interest charges on top of that do not need to be paid. They remain a company liability but are not a barrier to submitting the plan.
DPNs running alongside an SBR
Directors with lockdown DPNs often assume there is no point pursuing an SBR. Gary clarifies that the two can be dealt with in parallel, but they must be treated as separate matters. Where an SBR plan is approved and payments are made to the ATO, a portion of those payments will be allocated against the DPN debt, which reduces the director's personal liability. However, any balance not covered by the plan remains a personal debt.
The director needs to engage separately with the ATO on the personal DPN liability. Gary acknowledges the practical reality that many directors' only source of income is the business itself, so there is a crossover. But the key is full disclosure. If the director is relying on income from the company to service a personal payment plan on the DPN, that needs to be disclosed upfront so the ATO can factor it in.
Marcus stresses that entering into a payment arrangement with the ATO does not extinguish a DPN. The four options within the 21 day window are: pay the debt in full, appoint an SBR practitioner, appoint a liquidator, or appoint a voluntary administrator. A payment arrangement is not one of them.
Draft plan reviews and the five day window
A significant practical point from the episode: the ATO is still reviewing draft plans before they are formally issued. Practitioners can submit a draft plan to the ATO no later than five clear business days before the plan is due to be sent to creditors. If the standard information the ATO requests in its opening letter has been provided alongside the draft, the ATO will review it and provide feedback. Gary notes that in many cases, this process results in a plan the ATO finds acceptable before it is formally issued.
The ATO can also change its vote at any time before the voting deadline closes. If a practitioner believes the ATO has misinterpreted something or there is additional information that was not provided in time, there is a window to address it, but only if there is enough time remaining. Once the deadline passes, the vote is final.
SBR approval rates and what is changing
Gary shares updated figures. From January to May of the current year, the ATO was a creditor in most SBRs and the majority creditor in 96% of those. The approval rate for that period was 74%, down from the much higher rates seen in the early days of the legislation. Gary attributes the decline to two factors: a more consistent assessment process from the ATO, and a drop in the quality of some plans being submitted as the process becomes more widely known and used.
SBR appointments have more than doubled year on year. Last financial year saw just over 1,400 appointments. The current financial year is tracking towards around 3,000. The ATO sees the process as filling a genuine gap for smaller businesses that would otherwise end up in liquidation or simply be abandoned, with little or no return to creditors.
What practitioners can do better
Gary's final advice to practitioners is practical. First, get authorised as a contact on the company's tax affairs as early as possible. Unlike a liquidator or voluntary administrator, an SBR practitioner does not automatically become an authorised contact. The director or tax agent must appoint them, and until that happens, the ATO cannot share any information about the company's account. This causes unnecessary delays.
Second, provide the standard information the ATO requests as early as possible. The information is consistent from case to case and should largely be available without significant additional work. The earlier it is provided, the more time the ATO has to assess the plan, raise queries and work towards an outcome. Submitting information at the last minute and then blaming the ATO for not turning it around in time does not serve anyone's interests.
Note: The information discussed in this episode was current as at the date of recording, 26 June 2025. For the most up to date information, contact the ATO directly or refer to ato.gov.au.
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