Small business restructuring eligibility: is your company eligible for SBR?
A company is eligible for small business restructuring (SBR) if its directors resolve that it is insolvent or likely to become insolvent, its total liabilities are no more than $1 million on the day the restructuring practitioner is appointed, and neither the company nor its directors have used SBR or simplified liquidation in the previous seven years. Before the plan goes to creditors, the company must also have paid employee entitlements that are due and brought its tax lodgements up to date.
The SBR eligibility checklist
Some conditions are tested on the day the practitioner is appointed. Others must be met before the plan is sent to creditors, about four weeks later.
| Requirement | What it means | When it is tested |
|---|---|---|
| Insolvent or likely to become insolvent | The board resolves that the company is insolvent, or likely to become insolvent at some future time, and that a restructuring practitioner should be appointed. | Before the appointment |
| Total liabilities of $1 million or less | The company’s liabilities to pay admissible debts and claims must not exceed $1 million. Employee entitlements are not counted. | On the day the restructuring begins |
| No SBR or simplified liquidation in seven years (company) | The company must not have been under restructuring or in a simplified liquidation in the previous seven years. | On the day the restructuring begins |
| No SBR or simplified liquidation in seven years (directors) | No current director, and no one who was a director in the 12 months before the appointment, may have been a director of another company that was under restructuring or in a simplified liquidation in the previous seven years. A narrow exception applies to related companies. | On the day the restructuring begins |
| Not already in another process | The company cannot already be under restructuring, have an unfinished restructuring plan, be in voluntary administration, have an unfinished deed of company arrangement, or have a liquidator, provisional liquidator or administrator appointed. | On the day the restructuring begins |
| Employee entitlements paid | Employee entitlements that are due and payable, including superannuation, must be paid. Entitlements that are not yet due, such as accrued leave, do not have to be paid. | Before the plan goes to creditors |
| Tax lodgements up to date | Tax returns, activity statements, notices and other documents required under tax laws must be lodged. The tax debt itself does not have to be paid. | Before the plan goes to creditors |
How the $1 million liabilities test works
The test is applied to the company’s total liabilities on the day the restructuring begins. Under the Corporations Regulations, a liability for this purpose is a liability to pay an admissible debt or claim: broadly, a debt or claim that would be provable if the company were wound up, worked out as at the start of the restructuring.
- Counted: amounts owed to the ATO, suppliers, lenders, landlords and other creditors as at the start of the restructuring.
- Not counted: employee entitlements, which sit outside the plan and must be paid before the plan goes to creditors.
- Easy to miss: debts that are disputed, not yet invoiced, owed to related parties or guaranteed by a director. Give the practitioner a full list and let them assess each one.
If the company is close to the limit, get the figures checked before the appointment. A company that is over $1 million can’t use SBR, although voluntary administration may still be available.
The seven-year rule
SBR can only be used once in seven years, and the rule looks through to the directors. A company is not eligible if any current director, or anyone who was a director in the previous 12 months, was a director of another company that used SBR or simplified liquidation in the past seven years. There is an exception for related companies that start their processes within 20 business days of each other. See can a company or director use SBR more than once?
What must be paid and lodged before the plan goes to creditors
Two conditions must be met immediately before the practitioner sends the plan to creditors:
- Employee entitlements that are due and payable, including wages and superannuation. For directors and their relatives, only the first $2,000 of unpaid entitlements is protected and must be paid first; the rest can be dealt with in the plan. See SBR, employees and unpaid super.
- Tax lodgements. Outstanding tax returns, activity statements and similar documents must be lodged. The ATO assesses each outstanding lodgement separately.
If the company has not fully met these requirements, the law allows for substantial compliance. The ATO says a company relying on this must show it took reasonable steps and that external factors prevented it from finishing. The ATO also notes that if a plan is issued to creditors before these obligations are met, the restructuring will terminate. Start on the lodgements and the super the day you decide to restructure, not the week the plan is due.
Not sure if your company qualifies?
We can check the $1 million test, the seven-year rule and your lodgement position with you before any appointment is made. 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 your company is not eligible
Not qualifying for SBR does not mean the business can’t be saved. Depending on the company’s position, the options include:
- Voluntary administration, which has no $1 million limit and can lead to a deed of company arrangement
- an ATO payment plan or an informal arrangement with major creditors, if the company can trade out of its difficulty
- creditors’ voluntary liquidation, if the business is no longer viable.
For a side-by-side comparison, see voluntary administration, small business restructuring or liquidation: how to choose.
What to bring to a first conversation
- a list of every creditor and what the company owes each one
- the company’s ATO account statements and a list of any outstanding lodgements
- payroll and superannuation records showing anything unpaid
- details of any director penalty notice, statutory demand or court documents
- the names of every director in the last 12 months and any other companies they have been directors of
Common questions
What is the debt limit for small business restructuring?
A company’s total liabilities must not be more than $1 million on the day the restructuring begins. Only liabilities to pay admissible debts and claims are counted.
Do employee entitlements count towards the $1 million limit?
No. Employee entitlements are not admissible debts for SBR, so they are not counted. Entitlements that are due must instead be paid before the plan goes to creditors.
Does the company have to pay its ATO debt before entering SBR?
No. The tax debt can be dealt with in the plan. The company must, however, have lodged its outstanding tax returns, activity statements and other required documents before the plan goes to creditors.
Can a company that has received a director penalty notice use SBR?
Yes, if it is otherwise eligible. If the notice is a non-lockdown director penalty notice, appointing a restructuring practitioner within the 21 days remits the penalty. See SBR and director penalty notices.
Can a director whose other company used SBR do it again?
Generally not within seven years. A company is not eligible if a current director, or anyone who was a director in the previous 12 months, was a director of another company that used SBR or simplified liquidation in the past seven years, unless the related-company exception applies.
Sources: Corporations Act 2001 (Cth) Part 5.3B; Corporations Regulations 2001 (Cth) regs 5.3B.01 and 5.3B.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.
