Small business restructuring (SBR): keep trading while you deal with debt

Short answer: Small business restructuring (SBR) lets an eligible company with debts of $1 million or less keep trading, with the directors still in control, while a registered small business restructuring practitioner helps it put a repayment plan to creditors. If creditors accept, the company pays what the plan says and the rest of the covered debt is released.

If your company is struggling with ATO debt, supplier debt or a director penalty notice, SBR can be a cheaper and faster alternative to administration or liquidation. Our registered liquidators act as small business restructuring practitioners and explain every step in English, Mandarin, Cantonese or Korean.

Is my company eligible?

• The company is insolvent or likely to become insolvent.
• Total liabilities are $1 million or less on the day the practitioner is appointed.
• Employee entitlements that are due, including superannuation, are paid before the plan goes to creditors.
• All tax lodgements are up to date.
• The company and its directors have not used SBR or simplified liquidation in the last seven years (limited exceptions apply).

If you are not sure, we can check eligibility in a confidential first conversation. Our SBR eligibility checklist explains each condition, including the seven-year rule on using SBR more than once.

If restructuring is not available, the next comparison most directors need is voluntary administration vs liquidation.

How the SBR process works

1. Appointment. The directors resolve that the company is insolvent or likely to be, and appoint a small business restructuring practitioner.
2. Plan preparation – 20 business days. The practitioner works with the directors to prepare the plan and a declaration about the company’s affairs. This can be extended by up to 10 business days.
3. Creditor vote – 15 business days. Creditors vote on the plan. It is accepted if creditors holding a majority of the debt of those who vote agree. Related creditors cannot vote.
4. Plan in place. The company makes the payments set out in the plan. The practitioner administers the plan and pays creditors.
5. If creditors reject the plan, the restructuring ends and the directors decide the next step, such as voluntary administration or liquidation. See what happens if creditors reject an SBR plan.

SBR timeline at a glance

What a restructuring practitioner does

A small business restructuring practitioner is a registered liquidator appointed by the directors to guide the company through SBR. Unlike an administrator, the practitioner does not take control of the business. The directors keep running it day to day. The practitioner’s role is to:

• Check eligibility. This includes confirming that liabilities are under $1 million, and that employee entitlements and tax lodgements are up to date before the plan goes to creditors.
• Help prepare the plan. The practitioner works with the directors on the restructuring plan and the declaration about the company’s affairs.
• Certify the plan and put it to creditors. The practitioner confirms whether they believe the company is eligible and likely to be able to meet the plan.
• Consent to unusual transactions. Any transaction outside the ordinary course of business needs the practitioner’s consent during the restructuring.
• Administer the plan. Once creditors accept it, the practitioner receives the company’s payments and distributes them to creditors.
• End the restructuring if needed. The practitioner can end it if the company is not eligible, or if continuing would not be in creditors’ interests.

Greengate’s registered liquidators act as small business restructuring practitioners and can tell you in a first conversation whether SBR is likely to work for your company.

During the restructuring

• Directors stay in control of day-to-day trading. Transactions outside the ordinary course of business need the practitioner’s consent.
• Creditors are held back. Unsecured creditors cannot start or continue recovery action, and personal guarantees given by directors cannot be enforced without the court’s permission while the restructuring is under way. See SBR and personal guarantees and our guide for creditors.

Creditors vote on the plan, so the amount it offers them matters. We have set out what creditors actually receive in a small business restructuring, using figures from three completed Greengate matters alongside ASIC’s published data on the regime.

How the ATO approaches SBR

The ATO is a creditor in most small business restructurings. It generally supports plans that give creditors a better return, within a reasonable time, than liquidation would. It may reject plans where the company has a poor tax compliance history, director loans are unpaid, or the plan would give the business an unfair advantage. After a plan is accepted, the company must keep its tax lodgements and payments up to date. See also our guide to ATO debt help for company directors. For which ATO debts a plan covers and how the ATO votes, see small business restructuring and ATO debt.

What the ATO looks for in a small business restructuring plan

In most small business restructurings the ATO is a creditor, so its vote is often decisive. Before it votes, it asks the restructuring practitioner for supporting information. The directors and the company’s accountant usually prepare most of it:

• profit and loss statements and balance sheets for the 3 years before the appointment, plus interim accounts up to the appointment
• details of the company’s assets at the date of the practitioner’s appointment
• any amounts owed to excluded employees, such as directors, above the $2,000 priority cap (see the example below)
• an estimate of what creditors would receive if the company went into liquidation instead
• transaction reports for director, shareholder and related-entity loan accounts
• any research and development (R&D) tax offset claims for the current financial year
• a cash flow forecast, with the assumptions behind it
• changes to management and operations aimed at improving financial performance
• confirmation of any lump sum payments or contributions from third parties.

The ATO may ask for more on a case-by-case basis, and it won’t consider a plan until it has all the supporting information. Also, before the plan goes to creditors, the company must bring its tax lodgements up to date and pay employee entitlements that are due, including superannuation.

Timing: getting ATO feedback on the draft plan

The practitioner must send the ATO the draft plan and all the supporting information at least 5 full business days before the plan goes to creditors. Because the practitioner has 20 business days from the appointment to prepare the plan (extendable once by up to 10 business days), start gathering the information early, ideally in the first two weeks. However, if the ATO rejects a plan, there is no review of that decision.

Directors’ superannuation in a small business restructuring

Directors and their relatives are “excluded employees”. For them, only the first $2,000 of unpaid entitlements, such as superannuation, counts as a protected (priority) amount, and the company must pay it before the plan goes to creditors. Anything above $2,000 becomes an ordinary unsecured claim in the restructuring plan. See SBR, employees and unpaid super.

How Greengate helps you meet the ATO’s requirements

We work with you and your accountant to understand what the ATO will look for, assist with gathering and answering any questions around the supporting information and cash flow forecast, and get the draft plan to the ATO in time for its feedback. We explain each requirement in plain English, Mandarin or Korean.

Sources: ATO – Small business restructuring and ASIC – Small business restructuring and the restructuring plan.

SBR and director penalty notices

If you have received a non-lockdown director penalty notice, appointing a small business restructuring practitioner within the 21 days remits that penalty. Director penalties that are not remitted remain separate from the company’s debt: the ATO says it can still pursue them, although plan payments may reduce the amount. Read our DPN guide.

Small business restructuring guides

• SBR eligibility checklist: the $1 million test, the seven-year rule and what must be paid and lodged first.
• SBR and ATO debt: which tax debts the plan covers, how the ATO votes and director penalties.
• What goes into an SBR plan: what the plan must include, the three-year limit and the documents creditors receive.
• A guide for creditors: checking your debt, how the vote works and what happens next.
• Employees and unpaid super: what must be paid before the plan and how directors’ super is treated.
• Personal guarantees: the pause during the restructuring and what happens once a plan is made.
• If creditors reject the plan: what changes and the options that remain.
• If the company can’t keep up the plan: the 30-business-day rule and plan termination.
• Using SBR more than once: the seven-year rule for companies and directors.
• What creditors actually receive in SBR: figures from three completed Greengate matters.

Who can help in Sydney and Brisbane

Greengate Advisory is an Australian restructuring and insolvency firm led by registered liquidators. We advise company directors on small business restructuring, and our registered liquidators act as small business restructuring practitioners. Our offices are in Sydney (Suite 2, Level 32, 31 Market Street, Sydney NSW 2000, (02) 8318 3699) and Brisbane (Suite 5GB, Level 5, 199 George Street, Brisbane QLD 4000, (07) 3868 1888), and we act for companies across Australia. The first consultation is free and confidential, in English, Mandarin, Cantonese or Korean. Contact us or email info@ggadvisory.com.au.

Related guides

• Can’t pay your debts? See which deadlines are running and how the options compare.
• Safe harbour: how directors are protected while they pursue a genuine turnaround.
• Insolvent trading: when directors become personally liable for company debts, and the defences.
• Your options: every guide, grouped by the situation you are facing.

Common questions

Am I eligible for small business restructuring?

Your company may be eligible if it is insolvent or likely to become insolvent, its total liabilities are $1 million or less on the day the practitioner is appointed, and it meets the other conditions in the eligibility checklist above, such as paying employee entitlements that are due and being up to date with tax lodgements. A practitioner can check eligibility with you before any appointment.

How do I appoint a small business restructuring practitioner?

The directors resolve that the company is insolvent or likely to become insolvent and that a restructuring practitioner should be appointed, then appoint a registered liquidator who consents to act. Speak to the practitioner first, so they can confirm eligibility and the steps involved before the appointment is made.

What is a small business restructuring practitioner?

A registered liquidator (or a liquidator registered only for SBR work) who is appointed to help the company through SBR. They help prepare the plan, certify the company’s position to creditors, run the vote and administer the plan.

How long does SBR take?

About 35 business days from appointment to the creditor vote (20 to prepare the plan, 15 for creditors to vote), plus extensions if granted. The plan then runs for the period it sets out.

Does SBR affect my credit rating?

The appointment is a public insolvency notice, so lenders and suppliers can find it. It is a company process: it does not by itself make you personally bankrupt, but any personal guarantees and director penalties still need attention.

What does SBR cost?

Your first consultation is free and confidential. We will explain the costs of an SBR for your company before you decide to go ahead.

Can SBR deal with my ATO debt?

Yes, ATO debt is usually the largest debt in the plan. The ATO votes like other creditors and assesses each plan on its merits. See SBR and ATO debt.

How is superannuation owed to a director treated in SBR?

Directors are excluded employees, so only the first $2,000 of their unpaid super counts as protected, and the company must pay it before the plan goes to creditors. Anything above that becomes an unsecured claim under the plan. For example, if the company owes a director $40,000, it pays $2,000 first and the plan deals with the other $38,000.

Check if your company is eligible for SBR

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This page is general information, not advice about your situation.