Small Business Restructuring (SBR) is a formal insolvency process that allows eligible small companies to restructure their debts while directors remain in control of the business. To qualify, companies must meet specific eligibility requirements, including debt thresholds, tax lodgements and employee entitlement obligations. If rejected, alternative insolvency options should be considered.
On This Page
- What Is Small Business Restructuring?
- Who Is Eligible for Small Business Restructuring?
- SBR Process and Timeline
- Role of SBR Practitioner
- ATO Debt, DPNs and SBR Plan
- What Debts Can be Included in SBR?
- Employee Entitlements and Tax Lodgement Requirements
- SBR vs Voluntary Administration vs Liquidation
- Quick SBR Checklist for Directors
- Key Takeaways
- FAQs
What Is Small Business Restructuring?
Small Business Restructuring (SBR) is a formal insolvency process introduced as part of Australia’s insolvency reforms to help eligible small companies restructure their debts while continuing to trade.
Introduced under the Corporations Amendment (Corporate Insolvency Reforms) Act 2020 and becoming available from 1 January 2021, the SBR process aimed to provide small businesses with a simpler and more cost-effective restructuring option than traditional insolvency processes.
It is intended for companies that are experiencing financial distress but still have a viable underlying business. Rather than moving directly into liquidation, eligible companies may be able to propose a restructuring plan that allows creditors to recover part of what they are owed while giving the business an opportunity to continue operating.
Importantly, SBR is not a debt write-off scheme or a way to avoid legitimate obligations. It is a formal restructuring process designed to help viable small companies deal with unsustainable debt and achieve a better outcome for creditors than immediate liquidation.
Unsure if your business may qualify for SBR? Take the quiz.
Who Is Eligible for Small Business Restructuring?
Small Business Restructuring is intended for small companies that are experiencing financial distress but still have a viable underlying business.
While the rules should always be reviewed against the company’s specific circumstances, key eligibility requirements generally include:
- The company is insolvent or likely to become insolvent,
- Total liabilities do not exceed the applicable SBR debt threshold,
- Employee entitlements that are due and payable have been paid,
- Required tax lodgements have been completed, and
- The company and its directors meet the relevant eligibility criteria.
The employee entitlement and tax lodgement requirements are particularly important. Many otherwise viable companies are unable to access SBR simply because outstanding lodgements have not been brought up to date.
Eligibility should be assessed carefully before a practitioner is appointed.
SBR Process and Timeline
While every restructuring is different, the process generally follows a similar sequence.
Step 1: Appointment of the SBR Practitioner
The process begins when the directors appoint a Small Business Restructuring Practitioner.
Before the appointment is made, the practitioner will typically review the company’s circumstances to determine whether SBR may be available and appropriate.
Once appointed, the company formally enters the restructuring process and begins working with the practitioner to prepare a restructuring proposal.
Step 2: Financial Review and Plan Development
The practitioner works with the directors to review the company’s financial position and identify:
- The debts owed to creditors,
- The company’s assets and cash flow,
- The causes of the financial difficulties, and
- The amount the business may realistically be able to repay.
Using this information, a restructuring plan is developed. The plan outlines how creditors will be repaid and why the proposed outcome may be preferable to liquidation.
The proposal must be commercially realistic. Creditors are unlikely to support a plan that cannot be funded or completed.
Step 3: Restructuring Plan Is Proposed
Once finalised, the restructuring plan and supporting documents are provided to creditors.
The practitioner certifies the proposal and confirms whether, in their opinion, the company meets the eligibility requirements for SBR.
Creditors are then given an opportunity to review the proposal, consider the company’s position and assess whether accepting the plan is likely to provide a better return than liquidation.
Step 4: Creditor Voting
After the restructuring plan has been prepared, eligible creditors are invited to vote on whether it should be accepted.
Creditors assess:
- The amount being offered,
- The likelihood of payment,
- The company’s future prospects, and
- Whether the proposal provides a better return than liquidation.
The plan gets accepted if the required majority of creditor value votes in favour of it.
If the plan is accepted:
- The plan becomes binding,
- Participating creditors are bound by its terms, and
- The company proceeds with the restructuring arrangement.
If creditors reject the proposal, the company must consider alternative options.
Step 5: Outcome
If accepted, the company proceeds under the restructuring plan.
If rejected, directors may need to consider alternative restructuring or insolvency options.
The process is generally designed to move more quickly and cost-effectively than voluntary administration, while still providing creditors with an opportunity to vote on the proposed outcome.
Role of the SBR Practitioner
The Small Business Restructuring Practitioner acts as an independent professional who helps ensure the process is conducted properly and that creditors receive sufficient information to make an informed decision.
Unlike a voluntary administrator, the practitioner does not take control of the company.
Instead, the practitioner’s role is generally to:
- Assess whether the company is eligible for SBR,
- Review the company’s financial position,
- Assist with preparing the restructuring plan,
- Certify the proposal before it is presented to creditors,
- Facilitate the creditor voting process, and
- Oversee the plan if it is accepted.
ATO Debt, DPNs and SBR Plan
ATO debt is one of the most common reasons companies consider Small Business Restructuring.
Many otherwise viable businesses find themselves under pressure due to accumulated:
- PAYG withholding liabilities,
- Goods and Services (GST) debts,
- Superannuation obligations,
- Interest and penalties, or
- Other tax-related liabilities.
In many SBR proposals, the ATO is one of the largest creditors and may hold a significant voting position when creditors consider the restructuring plan.
Importantly, entering SBR does not automatically eliminate tax debt. Instead, the restructuring plan proposes how creditors, including the ATO, will be repaid.
Directors should also be aware of Director Penalty Notice (DPN) risks.
Where unpaid PAYG, GST or Super Guarantee Charge liabilities exist, directors may face personal liability in certain circumstances.
This means SBR should not be viewed as a substitute for understanding DPN exposure.
Further reading:
- Director Penalty Notice (DPN): Risks, Triggers, and Defence – 2026 Guide
- Lockdown DPN vs Non-Lockdown DPN
- Can Small Business Restructuring Stop a Director Penalty Notice?
If the Plan Is Accepted
If creditors approve the restructuring plan, the plan becomes binding on the participating creditors.
The company then continues operating while complying with the terms of the approved arrangement.
Depending on the proposal, this may involve:
- Lump-sum payments,
- Instalment payments,
- Contributions from future trading profits,
- Asset realisations, or
- Other agreed funding mechanisms.
The directors remain in control of the company throughout this period.
Creditors receive payments in accordance with the approved plan rather than pursuing their claims individually.
For many businesses, a successful SBR provides:
- Greater certainty,
- Improved cash flow management,
- Reduced creditor pressure, and
- An opportunity to continue trading while dealing with historical debt issues.
Most importantly, acceptance of the plan allows the company to move forward under a formal restructuring arrangement that has been approved by its creditors.
If the Plan Is Rejected
A rejected restructuring plan does not automatically mean the company enters liquidation.
However, it does mean the proposed SBR arrangement cannot proceed.
At that point, directors will need to reassess the company’s position and consider alternative options.
Depending on the circumstances, these may include:
- Revisiting negotiations with creditors,
- Informal repayment arrangements,
- Safe Harbour strategies,
- Voluntary administration,
- Liquidation, or
- Other restructuring solutions.
The appropriate next step will depend on:
- The company’s financial position,
- Creditor pressure,
- Cash flow,
- Director objectives, and
- Whether the business remains viable.
For some companies, rejection of the plan may simply mean a different restructuring pathway is required.
For others, it may indicate that more formal insolvency options need to be considered.
What Debts Can be Included in SBR?
A restructuring plan can potentially deal with a wide range of unsecured business debts.
Depending on the circumstances, debts commonly included may include:
- ATO liabilities,
- Trade creditors,
- Supplier debts,
- Unsecured loans,
- Outstanding business expenses, and
- Other unsecured creditor claims.
For many companies, ATO debt forms a significant portion of the total liabilities being addressed through the restructuring plan.
The purpose of the plan is to provide creditors with a proposed return that is often higher than what they might receive if the company entered liquidation.
Importantly, not all debts are treated identically, and the treatment of particular liabilities will depend on the company’s circumstances and the structure of the proposed plan.
Employee Entitlements and Tax Lodgement Requirements
One of the most important aspects of SBR eligibility is ensuring employee entitlements and tax lodgement obligations have been properly addressed.
Before a restructuring plan can be proposed:
- Employee entitlements that are due and payable generally need to be paid, and
- Required tax lodgements must be up to date.
This requirement exists because creditors are being asked to vote on a restructuring proposal and need access to accurate financial information about the company.
For many businesses, bringing lodgements up to date becomes the first step before restructuring can begin.
SBR vs Voluntary Administration vs Liquidation
Small Business Restructuring, voluntary administration and liquidation are all formal insolvency processes, but they are designed for different situations.
One of the key differences between SBR and other insolvency processes is that directors generally remain in control of day-to-day business operations throughout the restructuring period.
The table below gives an overview on the 3 common insolvency processes:
| Feature | Small Business Restructuring | Voluntary Administration | Liquidation |
| Company control remains with | Director | Administrator | Liquidator |
| Business continues trading | Yes | Yes | Generally no |
| Creditor voting required | Yes | Yes | No |
| Primary objective | Restructure debt and continue operating | Assess restructuring options | Wind up the company |
| Suitable for viable business | Yes | Often | No |
In broad terms:
Small Business Restructuring is best suited to eligible small companies that remain viable and can propose a credible repayment plan to creditors while directors continue operating the business.
Voluntary Administration is often used where the situation is more complex, creditor pressure is severe, or an independent administrator is needed to assess restructuring options.
Liquidation is generally appropriate where the company is no longer viable and there is no realistic prospect of recovery.
The right option depends on the company’s specific circumstances, financial position and restructuring prospects.
Quick SBR Checklist for Directors
Small Business Restructuring may be worth exploring if most of the following statements apply to your company:
- The business is still trading.
- The company still has customers, revenue and future work.
- Cash flow pressure is being caused by debt rather than a lack of demand.
- The company is insolvent or likely to become insolvent.
- Total liabilities fall within the applicable SBR eligibility threshold.
- Employee entitlements that are due and payable can be brought up to date.
- Outstanding tax lodgements can be completed.
- The business could continue operating if historical debt was restructured.
- Creditors may receive a better outcome than they would in liquidation.
- Directors want to remain involved in running the business.
If several of these factors apply, it may be worth obtaining advice about whether SBR is available and appropriate for the company’s circumstances.
Key Takeaways
Small Business Restructuring (SBR) is a formal insolvency process designed to help eligible small companies restructure their debts while continuing to trade.
Unlike voluntary administration, directors generally remain in control of the business throughout the process. Working with a SBR Practitioner, the company develops a restructuring plan that is presented to creditors for approval.
Importantly, SBR is not designed to help every distressed business — rather for viable small companies that can offer creditors a credible proposal and a better outcome than immediate liquidation.
If your company is experiencing creditor pressure, ATO debt or ongoing cash flow challenges, obtaining advice early may help clarify whether SBR is available and appropriate for your circumstances.
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
What is Small Business Restructuring?
Small Business Restructuring (SBR) is a formal insolvency process that allows eligible small companies to propose a debt restructuring plan to creditors while directors remain in control of day-to-day business operations.
Who can use Small Business Restructuring?
SBR is generally available to eligible small companies that are insolvent or likely to become insolvent and meet the relevant legislative requirements.
Do directors stay in control during Small Business Restructuring?
Yes.
One of the key features of SBR is that directors generally remain in control of the company’s operations while the restructuring process takes place.
This differs significantly from voluntary administration, where control passes to an external administrator.
What does a Small Business Restructuring Practitioner do?
The practitioner helps assess eligibility, reviews the company’s financial position, assists with preparing the restructuring plan, facilitates creditor voting and oversees the process.
The practitioner does not take control of the business.
Can ATO debt be included in Small Business Restructuring?
Yes.
ATO debt is commonly included in restructuring plans and is often one of the largest creditor claims considered during the process.
However, inclusion of ATO debt does not automatically remove Director Penalty Notice (DPN) risks.
More on this: Can Small Business Restructuring Stop a Director Penalty Notice?
Why do directors remain in control during SBR?
One of the most attractive features of Small Business Restructuring is that directors generally remain in control of the business throughout the process.
Unlike voluntary administration, control of the company does not pass to an external administrator.
Directors continue to:
- Operate the business,
- Manage staff,
- Deal with customers and suppliers,
- Make operational decisions, and
- Conduct day-to-day trading activities.
This director-in-possession model was deliberately designed to help viable small businesses continue operating while they restructure their debts.
For many business owners, maintaining continuity is critical. Customers, employees and suppliers often continue dealing with the company in the ordinary course of business while the restructuring process takes place.
However, remaining in control does not mean directors can ignore the process. Directors are expected to work closely with the SBR Practitioner, provide accurate financial information and comply with the requirements of the restructuring plan.
How long does Small Business Restructuring take?
The timeframe varies depending on the company’s circumstances.
Generally, the process involves:
- Appointment of the practitioner,
- Preparation of the restructuring plan,
- Creditor voting, and
- Implementation of the approved arrangement.
What happens to creditors during SBR?
Creditors play a central role in the Small Business Restructuring process.
Once the restructuring plan has been prepared, eligible creditors are given an opportunity to review the proposal and vote on whether it should be accepted.
The plan will typically outline:
- How much creditors will receive,
- When payments will be made,
- The source of those payments, and
- Why the proposed outcome is preferable to liquidation.
Creditors are not required to accept the proposal.
Instead, they must assess whether the restructuring plan offers a better commercial outcome than alternative insolvency options.
For directors, this means the proposal must be realistic, properly supported and commercially credible.
A poorly prepared plan is unlikely to receive creditor support.
What happens if creditors approve the restructuring plan?
If creditors approve the plan, it becomes binding on participating creditors and the company proceeds under the agreed restructuring arrangement.
The business continues operating while making payments in accordance with the plan.
What happens if creditors reject the restructuring plan?
The company does not automatically enter liquidation.
However, directors will need to consider alternative restructuring or insolvency options based on the company’s financial position and future prospects.
Is Small Business Restructuring the same as voluntary administration?
No.
Both are formal insolvency processes, but they operate differently.
In SBR, directors generally remain in control. In voluntary administration, control passes to an external administrator.
Is Small Business Restructuring the same as liquidation?
No.
Liquidation is designed to wind up a company, while Small Business Restructuring is designed to help viable businesses continue operating while dealing with debt.
Does entering Small Business Restructuring stop creditors action?
The effect on creditors will depend on the circumstances and timing of the appointment. Directors should obtain advice regarding the protections available under the SBR process and how particular creditors may be affected.
Can Small Business Restructuring stop a Director Penalty Notice?
Potentially.
Depending on the circumstances and the type of DPN involved, SBR may assist with certain non-lockdown DPN liabilities.
However, it will not necessarily remove all personal liability risks.
For more information, see:
Is Small Business Restructuring a debt write-off scheme?
No.
SBR is a formal restructuring process that requires the company to propose a credible repayment plan to creditors.
The objective is to provide creditors with a better outcome than they would likely receive in liquidation while allowing the business to continue operating.
