Small business restructuring, employees and unpaid super

Employees keep their jobs in a small business restructuring (SBR), because the directors stay in control and the business keeps trading. Wages, superannuation and other entitlements that are due must be paid before the plan goes to creditors. Employee entitlements are not admissible debts, so the plan can’t reduce them. Directors and their relatives are the exception: for them, only the first $2,000 of unpaid entitlements is protected, and the rest can be dealt with in the plan.

What SBR means for employees

• Employment continues. Unlike voluntary administration or liquidation, no one takes control of the business away from the directors. Staff keep working and are paid as usual.
• Entitlements are protected. Employee entitlements are excluded from the admissible debts a plan deals with, so they are not compromised.
• Accrued leave carries on. Entitlements that are not yet due, such as annual leave and long service leave, don’t have to be paid out before the plan. They remain owed in the ordinary way.
• Overdue amounts must be paid first. Wages and super that are already due must be paid before the plan goes to creditors.

What must be paid before the plan goes to creditors

Immediately before the practitioner sends the plan to creditors, the company must have paid all employee entitlements that are due and payable, or be substantially complying with that requirement. If this isn’t met, the plan can’t properly be put to creditors. The ATO notes that if a plan is issued before these obligations are met, the restructuring will terminate.

Unpaid super needs care. The ATO points out that the superannuation guarantee charge (SGC) is not itself an employee entitlement under the Corporations Act. Paying outstanding SGC so that contributions reach employees’ super funds can, however, help show substantial compliance.

How each kind of entitlement is treated

An example

A company owes $18,000 in super for its four employees and $12,000 in super for its director. Before the plan goes to creditors, it must pay the employees’ $18,000 and the first $2,000 of the director’s super. The remaining $10,000 owed to the director becomes an unsecured claim in the plan, alongside the company’s other creditors. Any SGC penalties and interest are also dealt with in the plan.

This is a simplified illustration. How super is treated in a particular restructuring depends on the company’s records, what has been lodged with the ATO and the timing of payments.

Unpaid super and director penalties

Unpaid super is also a director penalty risk. Directors can be personally liable for a company’s unpaid super guarantee charge. Since Payday Super started on 1 July 2026, a super shortfall stays out of lockdown only if the company reports it by lodging a voluntary disclosure statement before the director penalty due day. If it does not, only payment in full will remit a director penalty notice for that super, and appointing a restructuring practitioner will not. See director penalty notices and the super guarantee charge.

The Fair Entitlements Guarantee is not available in SBR

The Fair Entitlements Guarantee (FEG) is the government safety net for employees who lose their jobs when their employer is liquidated or a sole trader becomes bankrupt. It does not apply in SBR. In practice, it is rarely needed: entitlements that are due must be paid before the plan, and entitlements not yet due are not affected by the plan. If a restructuring fails and the company later goes into liquidation, FEG may become available at that point.

What employees should know

• the company will usually tell staff about the restructuring, and public documents must show ‘restructuring practitioner appointed’ after the company name
• employees owed entitlements are not affected creditors for those entitlements, so they don’t vote on the plan for them
• if you believe wages or super that are due haven’t been paid, raise it with the company or the restructuring practitioner. Unpaid super can also be reported to the ATO.

Common questions

Do employees lose their jobs in small business restructuring?

No. The directors stay in control and the business keeps trading, so employment continues as normal.

Can an SBR plan reduce what employees are owed?

No. Employee entitlements are not admissible debts under SBR, so the plan can’t compromise them. Entitlements that are due must be paid before the plan goes to creditors.

Does unpaid super have to be paid before SBR?

Super that is due must be paid, or the company must be substantially complying, before the plan goes to creditors. The ATO says paying outstanding SGC so that contributions reach employees’ funds can help show substantial compliance.

How is a director’s unpaid super treated in SBR?

Directors and their relatives are excluded employees. Only the first $2,000 of their unpaid entitlements is protected and must be paid before the plan. Anything above that becomes an unsecured claim in the plan.

Is the Fair Entitlements Guarantee available in SBR?

No. FEG is only available when an employer is liquidated or becomes bankrupt. It may become available if a restructuring fails and the company is later liquidated.

Sources: Corporations Act 2001 (Cth) Part 5.3B and s 596AA; Corporations Regulations 2001 (Cth) regs 5.3B.01 and 5.3B.24; ASIC, Small business restructuring and the restructuring plan; ATO, Small business restructuring; Department of Employment and Workplace Relations, Fair Entitlements Guarantee. This page is general information, not advice about your circumstances. Last reviewed: 16 October 2026.