Can a company or director use small business restructuring more than once?
Generally not within seven years. A company can’t enter small business restructuring (SBR) if it has been under restructuring or in a simplified liquidation in the previous seven years. The rule also looks at the directors: if anyone who is a director, or was one in the 12 months before the appointment, was a director of another company that used SBR or simplified liquidation in the previous seven years, the company is not eligible. There is a narrow exception for related companies that start within 20 business days of each other.
The two seven-year tests
| Test | Who it looks at | What disqualifies the company |
|---|---|---|
| Company test | The company itself | It has been under restructuring, or in a simplified liquidation, in the previous seven years |
| Director test | Every current director, and anyone who was a director in the 12 months before the appointment | That person was a director of another company that was under restructuring, or in a simplified liquidation, in the previous seven years |
Both tests are applied on the day the restructuring begins. The rule turns on having been under restructuring, not on how it ended, so a restructuring that ended without a plan being accepted still counts.
How the director test works in practice
These simplified examples show how the director test can catch directors who are not expecting it.
- A second business. A director’s earlier company used SBR four years ago. Her current company now has ATO debt. It can’t use SBR while she remains a director, until seven years have passed.
- A recent resignation. A director resigns from the board three months before the appointment. Because he was a director within the previous 12 months, his history still counts.
- A family group. A trading company and its related labour-hire company both need to restructure. If their processes begin within 20 business days of each other, the related-company exception can allow both to proceed.
Resigning a director to make a company eligible will not work within the 12-month window, and changing directors for that purpose can raise its own legal problems. Get advice first.
The related-company exception
The director test does not apply where the other company is a related body corporate and:
- its restructuring practitioner was appointed no more than 20 business days before this company’s restructuring began, or
- it began a simplified liquidation no more than 20 business days before this company’s restructuring began.
For a group of related companies, this means the timing of each appointment matters. If more than one company in a group is in difficulty, plan the restructuring of the whole group at the same time.
Simplified liquidation has the same seven-year rule
Simplified liquidation, the streamlined liquidation for companies with liabilities of $1 million or less, uses equivalent seven-year tests for the company and its directors. The Corporations Regulations include an exception where a company’s restructuring terminated no more than 20 business days before the company began the simplified liquidation process. If an SBR is not going to succeed, the timing of the next step can therefore affect which kind of liquidation is available. See what happens if creditors reject an SBR plan.
Used SBR before, or have a director who has?
We can check whether the seven-year rule applies to your company and, if it does, which options remain open. Book a free 30-minute call with Luke D’Costa, Senior Manager – Debt Strategist.
Book a free 30-minute call Sydney 02 9660 3532 · Brisbane 07 3868 1888
If SBR is not available
- Voluntary administration. There is no seven-year limit and no $1 million limit. Creditors can approve a deed of company arrangement that compromises the company’s debts. See voluntary administration.
- An arrangement with the ATO. If tax is the main debt and the business can pay it over time, an ATO payment plan may be enough.
- Liquidation. If the business can’t be saved, creditors’ voluntary liquidation closes the company in an orderly way.
Get it right the first time
Because a company generally gets one SBR in seven years, the first plan needs to work. The ATO is often the largest creditor and its vote is often decisive. It says practitioners should put forward the best proposal possible from the start, because a plan can’t be changed once voting begins. Our small business restructuring guide sets out the information the ATO asks for, and what creditors actually receive in SBR shows the returns in three completed Greengate matters.
Common questions
Can a company use small business restructuring twice?
Not within seven years. A company is not eligible if it has been under restructuring or in a simplified liquidation in the previous seven years.
Does the seven-year rule apply to directors?
Yes. A company is not eligible if any current director, or anyone who was a director in the 12 months before the appointment, was a director of another company that used SBR or simplified liquidation in the previous seven years, unless the related-company exception applies.
What is the related-company exception?
The director test does not apply if the other company is a related body corporate whose restructuring or simplified liquidation began no more than 20 business days before this company’s restructuring began.
Does a failed SBR count towards the seven years?
Yes. The test is whether the company has been under restructuring, not whether a plan was accepted or completed.
What can I do if the seven-year rule rules out SBR?
Voluntary administration has no seven-year or $1 million limit and can lead to a deed of company arrangement. An ATO payment plan or liquidation may also suit, depending on whether the business is viable.
Sources: Corporations Act 2001 (Cth) s 453C; Corporations Regulations 2001 (Cth) regs 5.3B.03 and 5.5.03; ASIC, Small business restructuring and the restructuring plan; ATO, Small business restructuring. This page is general information, not advice about your circumstances. Last reviewed: 16 October 2026.
Written by John Chand, Principal and Registered Liquidator. John has more than 17 years’ insolvency experience. Meet the team.
