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.
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.
| Amount owed | Treatment in SBR |
|---|---|
| Wages and super due to employees who are not directors or their relatives | Must be paid before the plan goes to creditors |
| Accrued leave not yet due | Not paid out before the plan. Remains owed and is paid when it falls due |
| Unpaid entitlements of directors and their relatives (excluded employees): the first $2,000 | Protected. Must be paid before the plan goes to creditors |
| Unpaid entitlements of excluded employees above $2,000 | An ordinary unsecured claim, dealt with in the plan |
| SGC penalties under Part 7 of the Superannuation Guarantee (Administration) Act, and general interest charge on those penalties and on the shortfall | The ATO expects these to be included in the plan |
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.
Behind on wages or super?
Paying what is due is a condition of SBR. We can work out with you what has to be paid, by when, and how to fund it. Book a free 30-minute call with Luke D’Costa, Senior Manager – Debt Strategist.
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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 (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.
No. The directors stay in control and the business keeps trading, so employment continues as normal.
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.
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.
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.
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.
Written by John Chand, Principal and Registered Liquidator. John has more than 17 years’ insolvency experience. Meet the team.