Small business restructuring and director penalty notices

Appointing a small business restructuring (SBR) practitioner within 21 days of a non-lockdown director penalty notice (DPN) remits the penalty. It is one of the four remission options, alongside payment, voluntary administration and liquidation. Unlike administration or liquidation, SBR lets the directors keep running the business while a plan is put to creditors. It does not remit lockdown amounts, and the company must meet the SBR eligibility rules.

How SBR deals with a DPN

Not sure which you have? See lockdown vs non-lockdown DPNs and how to count the 21 days. Weekends and public holidays count.

Is the company eligible?

• The company is insolvent or likely to become insolvent.
• Its total liabilities are $1 million or less on the day the practitioner is appointed.
• Employee entitlements that are due, including super, are paid before the plan goes to creditors.
• Its tax lodgements are up to date before the plan goes to creditors.
• Other conditions apply, including about previous use of SBR or simplified liquidation by the company or its directors.

For the full process, see our small business restructuring guide.

Why SBR is often considered for a DPN

• Directors stay in control. The business keeps trading under the directors, with the practitioner overseeing the plan.
• The ATO is treated like other unsecured creditors. Creditors vote on the plan, and it is accepted if creditors holding a majority of the debt of those who vote agree. Related creditors cannot vote.
• It deals with the whole problem. A plan can cover the company’s other unsecured debts too, not only the amounts on the notice.

Timing within the 21 days

The appointment, not the first phone call, is what counts. Before a practitioner can be appointed, the directors must resolve that the company is insolvent or likely to become insolvent, and the practitioner must consent. Allow time for that, and for the practitioner to review the company’s position, well before the last day.

What happens after the appointment

1. Plan preparation: 20 business days. The practitioner works with the directors to prepare the plan. This can be extended by up to 10 business days.
2. Creditor vote: 15 business days. Creditors vote on the plan.
3. Plan in place. The company makes the payments the plan sets out.

If creditors reject the plan, the restructuring ends and the directors decide the next step, such as voluntary administration or liquidation.

SBR compared with the other options

A payment plan does not remit a director penalty. Voluntary administration and liquidation do, if started within the 21 days, but the directors lose control of the company. See voluntary administration, SBR or liquidation: how to choose.

For which ATO debts an SBR plan covers and how the ATO votes, see small business restructuring and ATO debt. To check whether your company qualifies, see the SBR eligibility checklist.

Common questions

Does small business restructuring stop a director penalty notice?

Yes, for non-lockdown amounts, if a small business restructuring practitioner is appointed within 21 days of the notice. It does not remit lockdown amounts, which can only be remitted by payment in full.

Is it enough to call a practitioner within the 21 days?

No. The practitioner must actually be appointed within the 21 days. That needs the directors’ resolution and the practitioner’s consent, so start early.

Can my company use SBR if it is behind on BAS lodgements?

The company can appoint a practitioner, but its tax lodgements must be up to date before the plan can be put to creditors. Overdue lodgements also create lockdown amounts on future notices.

What if creditors reject the restructuring plan?

The restructuring ends and the directors decide the next step, such as voluntary administration or liquidation. Get advice on how that affects any director penalties.

Who controls the company during small business restructuring?

The directors. Unlike voluntary administration, the directors stay in control of the business while the practitioner helps prepare a plan for creditors.

Sources: Taxation Administration Act 1953 (Cth) Schedule 1, Division 269; Corporations Act 2001 (Cth) Part 5.3B; Australian Taxation Office, Director penalty regime (last updated 16 April 2026). This page is general information, not advice about your circumstances. Last reviewed: 9 October 2026.