Employee entitlements that are due and payable must be paid before a company can propose a SBR plan—they cannot simply be included alongside other debts. “Due and payable” refers to entitlements the company is already legally required to pay, not future obligations or accrued entitlements that are not yet payable.
Free Download: SBR Eligibility Checklist
On This Page
- Introduction
- Why Employee Entitlements Matter
- What Are Employee Entitlements?
- Which Employee Entitlements Must Be Paid Before Entering SBR?
- What Does “Due and Payable” Mean?
- Employee Entitlements vs. Other Debts
- What Records Should Directors Prepare?
- Common Problems That Delay SBR Eligibility
- What Directors Should Do Before Meeting an SBR Practitioner
- Summary
- FAQs
Introduction
Employee entitlements are one of the most important eligibility requirements for Small Business Restructuring (SBR), yet they are also one of the most misunderstood.
Many directors assume unpaid wages, superannuation or leave can simply be included in a restructuring plan alongside other company debts. In reality, the law provides greater protection for employees. As required under ASIC’s Small Business Restructuring framework, before a company can propose an SBR plan, employee entitlements that are due and payable must generally be paid.
Understanding what this requirement means—and ensuring the necessary records are in order—can help directors avoid delays and determine whether their company is eligible for SBR.
This guide explains which employee entitlements matter, what “due and payable” means at a general level, and why unpaid superannuation is often a key issue when considering Small Business Restructuring.
Why Employee Entitlements Matter
Small Business Restructuring is designed to help financially distressed companies restructure their debts while continuing to trade. However, this relief comes with important eligibility requirements intended to protect employees.
Under the Corporations Act and ASIC’s Small Business Restructuring framework, a company cannot propose a restructuring plan unless it has paid all employee entitlements that are due and payable. This requirement does not extend to employee entitlements that are not yet due to be paid.
This distinction reflects the purpose of SBR. While unsecured creditors may be asked to accept a compromise on their debts through a restructuring plan, employees are afforded greater protection. Directors cannot use the restructuring process to avoid paying wages or other employee entitlements that have already fallen due.
Meeting this requirement is also important from a practical perspective. An SBR Practitioner will review the company’s financial position before proceeding, and unpaid employee entitlements can delay or prevent the restructuring process until they are addressed.
What Are Employee Entitlements?
Employee entitlements are the payments and benefits that employees are legally entitled to receive under their employment arrangements and applicable workplace laws. This includes:
- Wages and salaries
- Superannuation
- Leave entitlements, including annual leave, personal leave, and long service leave
- Redundancy and Notices
While these are the main employee entitlements directors should consider, not all are immediately relevant for SBR eligibility. Much depends on whether they are due and payable.
Which Employee Entitlements Must Be Paid Before Entering SBR?
Wages
Outstanding wages that employees should already have received will generally need to be paid before a restructuring plan can be proposed.
This includes amounts that have become payable under the company’s normal payroll cycle, such as ordinary wages, overtime and other remuneration that is already due.
More on ‘due and payable’ entitlements in the next section.
Superannuation
Superannuation is one of the most closely scrutinised areas during the SBR process.
Outstanding Superannuation Guarantee (SG) obligations can affect both SBR eligibility and the ATO’s view of the company’s compliance history. If required super contributions have not been paid when they are due, directors should address these obligations before proceeding with a restructuring proposal.
Because unpaid super may also result in Superannuation Guarantee Charge (SGC) liabilities, it is often one of the first issues reviewed by an SBR Practitioner.
Leave Entitlements
Leave entitlements are only relevant where payment has become due.
For example, annual leave that an employee has accrued but has not yet become payable is generally treated differently from leave that must already be paid under the employee’s employment arrangements.
Similarly, long service leave or personal leave may only require payment in particular circumstances. Directors should review each employee’s position rather than assuming every accrued leave balance must be paid immediately.
Redundancy and Notice
Redundancy pay and payment in lieu of notice are generally only relevant where an employee’s employment has ended and those amounts have become payable.
As many companies continue trading throughout the Small Business Restructuring process, these entitlements are often not immediately payable simply because the company has entered SBR.
What Does “Due and Payable” Mean?
Not every employee entitlement has to be paid immediately before entering Small Business Restructuring. The key question is whether the entitlement is due and payable.
In simple terms, “due and payable” refers to employee entitlements that the company is already legally required to pay. It does not mean every employee entitlement that may become payable in the future.
For example, wages that should have been paid on the company’s normal pay cycle would generally be considered due and payable. Likewise, superannuation contributions that have reached their payment deadline would generally need to be addressed.
On the other hand, employee entitlements that have accrued but are not yet required to be paid—such as annual leave that an employee has not taken or redundancy pay that has not been triggered—are generally not captured by this requirement simply because they exist.
ASIC states that a company cannot propose a restructuring plan unless employee entitlements that are due and payable have been paid, while excluding employee entitlements that are not currently due to be paid.
Because determining whether an entitlement is due and payable depends on the company’s circumstances and employment obligations, directors should seek advice if they are unsure.
Employee Entitlements vs. Other Debts
Before a company can propose an SBR plan, employee entitlements that are due and payable generally need to have been paid. This reflects the policy objective of protecting employees, who rely on wages and employment benefits for their livelihood.
By comparison, many other unsecured creditors—such as suppliers, contractors and trade creditors—may participate in the restructuring plan and vote on whether to accept a compromise of their debts.
| Employee Entitlements | Ordinary Unsecured Creditors |
| Due and payable entitlements generally must be paid before an SBR plan is proposed. | Eligible debts may be included in the restructuring plan. |
| Protected by specific SBR eligibility requirements. | May agree to compromise their debts through the creditor voting process. |
| Cannot generally be treated in the same way as unsecured trade debt. | Participate in the restructuring proposal as creditors. |
Identifying any unpaid wages, superannuation or other due employee entitlements before meeting an SBR Practitioner can help avoid unnecessary delays and determine whether the company is ready to proceed with Small Business Restructuring.
What Records Should Directors Prepare?
Before meeting with a Small Business Restructuring (SBR) Practitioner, directors should ensure they have accurate and up-to-date employee records.
These records help the practitioner verify whether employee entitlements that are due and payable have been paid and whether the company satisfies one of the key eligibility requirements for SBR. Missing or incomplete records can delay the assessment and may require additional work before the restructuring process can proceed.
The records commonly requested include:
- Current payroll reports.
- Payslips and payroll summaries.
- Superannuation contribution records.
- Single Touch Payroll (STP) reports.
- Annual leave, personal leave and long service leave balances.
- Employment agreements or employment contracts.
- Records of any unpaid wages or outstanding employee payments.
- Details of any Superannuation Guarantee Charge (SGC) liabilities.
- Accounting or payroll reports from accounting systems such as Xero, MYOB or QuickBooks.
Directors should also reconcile these records against their accounting system to ensure employee liabilities have been recorded accurately. Identifying discrepancies early can make the restructuring assessment smoother and reduce the risk of unexpected issues arising during the appointment process.
Common Problems That Delay SBR Eligibility
Many companies are otherwise eligible for Small Business Restructuring but encounter delays because their employee records or payroll obligations are not in order.
Some of the most common issues include:
Unpaid Superannuation
Outstanding superannuation contributions are one of the most frequent barriers to SBR eligibility. Because super obligations are closely linked to ATO compliance, unpaid contributions often require attention before a restructuring plan can be proposed.
Outstanding Wages
If employees are still owed wages that are due and payable, the company will generally need to address these obligations before proceeding with SBR.
Incomplete Payroll Records
Missing payroll reports, inaccurate leave balances or incomplete employee records can make it difficult for an SBR Practitioner to verify the company’s position, resulting in unnecessary delays.
Outstanding Tax Lodgements
Although tax lodgements are separate from employee entitlements, they are also an important SBR eligibility requirement. Companies with overdue lodgements often need to address these issues alongside payroll obligations before moving forward.
Incorrect Leave Balances
Some businesses discover that leave accruals have not been properly recorded or reconciled. Resolving these discrepancies early helps ensure employee entitlements are accurately reflected.
Assuming Employee Debts Can Be Included in the Restructuring Plan
A common misconception is that unpaid wages or other employee entitlements can simply be compromised alongside supplier or trade debts.
Addressing these obligations early gives directors a clearer understanding of whether the company is ready to proceed with Small Business Restructuring.
What Directors Should Do Before Meeting an SBR Practitioner
Preparing the right information before your first meeting with an SBR Practitioner can save valuable time and help identify any issues that may affect your eligibility.
Before your consultation, consider working through the following checklist:
- Confirm that employee wages have been paid and identify any outstanding amounts.
- Review whether Superannuation Guarantee (SG) contributions are up to date.
- Check whether any employee entitlements are currently due and payable.
- Reconcile annual leave, personal leave and long service leave balances.
- Ensure outstanding tax lodgements have been completed where possible.
- Prepare payroll reports, superannuation records and employee documentation.
- Compile a list of creditors and the company’s current financial position.
- Gather accounting reports from your bookkeeping or payroll software.
Preparing these records in advance can make the eligibility assessment faster and help identify any issues before the restructuring process begins.
Summary
Employee entitlements are one of the most important eligibility requirements for Small Business Restructuring.
Before a company can propose an SBR plan, employee entitlements that are due and payable must generally be paid. This requirement protects employees and distinguishes their entitlements from ordinary unsecured debts, which may be compromised under a restructuring plan.
For many companies, unpaid superannuation, outstanding wages or incomplete payroll records are among the biggest obstacles to entering SBR. Identifying these issues early gives directors the opportunity to resolve them before they delay the restructuring process.
If you’re unsure whether your employee entitlements satisfy the SBR eligibility requirements, seeking advice early can help identify any issues before they delay or prevent the restructuring process.
At Halo Advisory, we work for you — the director. Financial expert Greg Bartels offers a no-obligation, consultation to help you understand where you stand, what risks exist, and what options are realistically available before deadlines reduce control. Get in touch today.
FAQs
Can a company enter Small Business Restructuring if employee wages are unpaid?
Generally, no.
Before a company can propose an SBR plan, employee entitlements that are due and payable must generally have been paid. Outstanding wages that should already have been paid may therefore affect the company’s eligibility.
Do all leave entitlements have to be paid before SBR?
Not necessarily.
The requirement applies to employee entitlements that are due and payable, not every entitlement that has accrued. Whether a particular leave entitlement must be paid will depend on the circumstances and when it becomes payable.
Does unpaid super stop a company from entering Small Business Restructuring?
It can.
Outstanding superannuation contributions may affect whether the company satisfies the employee entitlement requirements for SBR. They may also influence the ATO’s assessment of the company’s compliance history.
What does “due and payable” mean in case of employee entitlements?
At a general level, it refers to employee entitlements that the company is already legally required to pay.
It does not automatically include every entitlement that employees may receive in the future. If you’re unsure whether a particular entitlement is due and payable, you should obtain professional advice.
Are future leave accruals included?
Generally, no.
Employee entitlements that have accrued but are not yet due to be paid are generally not captured by the SBR eligibility requirement simply because they exist.
Can redundancy payments be included in a Small Business Restructuring plan?
Redundancy payments are generally only relevant where they have become payable.
If employees continue working while the company undergoes Small Business Restructuring, redundancy obligations are often not triggered solely because the company has entered the process.
Are employee entitlements treated differently from supplier debts?
Yes.
Employee entitlements that are due and payable generally need to be paid before an SBR plan can be proposed. By contrast, eligible unsecured debts owed to suppliers and other creditors may be compromised under the restructuring plan.
What payroll records will an SBR Practitioner ask for?
While the records requested vary between businesses, practitioners commonly ask for payroll reports, payslips, superannuation records, leave balances, STP reports, employment agreements and accounting records that verify employee liabilities.
Preparing these documents in advance can make the eligibility assessment more efficient.
Can the ATO reject an SBR proposal because of unpaid super?
The ATO considers a range of factors when assessing a restructuring proposal.
Because unpaid superannuation is closely linked to employee entitlement requirements and tax compliance, unresolved super obligations may affect both the company’s eligibility for SBR and the ATO’s support for the proposed plan.
What happens if unpaid employee entitlements are discovered during the SBR process?
If unpaid employee entitlements that are due and payable are identified during the eligibility assessment, they will generally need to be addressed before the company can propose a restructuring plan.
Identifying these issues early can help avoid delays and allow directors to understand the steps required before proceeding with Small Business Restructuring.
