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Business & ATO debt

Small business restructuring: a plan with creditors, with directors still in control.

Small business restructuring (SBR) is a formal process for eligible small companies. A registered restructuring practitioner helps the directors put a plan to creditors, including the ATO, while the directors keep running the business. Debt Negotiators works with a registered small business restructuring practitioner.
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5 quick questions for company directors and business owners. Debt Negotiators is a fee-based service.
Good to know
Total liabilities must not exceed $1 million, and other eligibility criteria apply
Employee entitlements that are due and tax lodgements must be up to date before a plan goes to creditors
The appointment is recorded on the public ASIC company register
It won’t remit a lockdown director penalty

Who it suits →

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The basics

What is small business restructuring?

Small business restructuring is a formal process under Part 5.3B of the Corporations Act 2001. It’s for small incorporated companies with straightforward debts. The company proposes a restructuring plan to its creditors, which usually means paying back part of what’s owed over an agreed time.

If creditors accept the plan and the company meets all of its obligations under it, the company is released from the debts the plan covers.

The directors keep running the business throughout. A restructuring practitioner advises the company, helps prepare the plan and tells creditors whether they believe it’s realistic. Our page on working with a restructuring practitioner explains their role.

Eligibility criteria at a glance
The business is run through a company. SBR isn’t available to sole traders or individuals
Total liabilities don’t exceed $1 million on the day the practitioner is appointed
The directors resolve that the company is insolvent or likely to become insolvent
Employee entitlements that are due, including super, are paid and tax lodgements are up to date before the plan is proposed
The company, and anyone who’s been a director in the past 12 months, hasn’t been through SBR or simplified liquidation in the past 7 years, with limited exceptions
Eligibility criteria apply. The practitioner confirms whether they’re met.
Honest answer

Who small business restructuring suits

SBR is built for a business that can keep trading but can’t clear its past debts in full.
It can make sense when
Total liabilities are under $1 million
Lodgements are up to date, or can be brought up to date
Employee entitlements that are due, including super, can be paid
The business can fund plan payments as well as its running costs
It’s usually not the answer when
The business has already run out of cash to keep trading
Total liabilities are over $1 million
A director has been through SBR or simplified liquidation at another company in the past 7 years
The main worry is a lockdown director penalty, which SBR won’t remit
The business is run as a sole trader or partnership rather than a company

See the alternatives →

Step by step

How small business restructuring works

1

The directors appoint a practitioner
The board resolves that the company is insolvent or likely to become insolvent, and appoints a registered restructuring practitioner in writing. The appointment can’t be revoked.
2

The plan is prepared
The directors prepare the plan with the practitioner, usually within 20 business days (extendable once by up to 10). Unsecured creditors generally can’t enforce their debts during this time.
3

Creditors vote
Creditors usually have 15 business days to respond. The plan is accepted if a majority by value of the creditors who respond vote for it. Related creditors can’t vote.
4

The plan runs
The company pays into the plan, and the practitioner pays creditors. Plan payments can’t run for more than 3 years. Once every obligation is met, the company is released from the debts the plan covers.
Where Debt Negotiators fits

We aren’t a restructuring practitioner. We help directors look at the numbers first: roughly what’s owed, lodgements, employee entitlements and any director penalty notices, so you know whether SBR looks worth exploring before anyone is appointed.

Where it does, we work with a practitioner from our panel of registered small business restructuring practitioners, who confirms eligibility and decides whether to accept the appointment. We keep helping with the wider debt position, including any personal exposure.

Referrals and payments: We work with a panel of registered small business restructuring practitioners. If we refer your company to one, we may receive a referral payment, and we may charge fees for pre-insolvency work. We’ll tell you about any payment or fee before you decide.

Before you start

The downsides to weigh up

The ATO is a creditor in most of these plans and its vote is often decisive. Its published approach is that it generally supports a plan where creditors would receive more within a reasonable time than in a winding up, and there are no public interest concerns.

If you’ve received a director penalty notice, timing matters: appointing a practitioner within the 21 days can remit a non-lockdown penalty.

Things to know
The company register shows it’s in external administration, and company documents must say “restructuring practitioner appointed”
It won’t remit a lockdown director penalty, or one not remitted within 21 days. Directors stay liable for any balance
Personal guarantees are paused only during the restructuring, not once the plan is made
An ATO garnishee notice already in place generally keeps operating
If the plan isn’t completed, the unpaid debts become due again
Related options

If restructuring isn’t the right fit

These are the other business tax debt options we work through with directors, each with its downside.

ATO payment arrangement
A payment plan proposal the business can keep up with, based on its cash flow and lodgements.
Good to know: interest can keep building, and the plan can be cancelled if payments or lodgements fall behind.

Business tax debt options →

Director penalty notices
If a DPN has arrived, which options are open depends on lodgement dates and how much of the 21 days is left.
Good to know: a lockdown penalty can only be remitted by paying the debt in full.

How DPNs work →

Working with an SBR practitioner
What a registered restructuring practitioner does and checks, and how we work with one.
Good to know: only a registered liquidator can act as a restructuring practitioner.

About practitioners →

Administration or liquidation
Formal appointments where a registered liquidator or administrator takes control of the company.
Good to know: directors hand over control, and liquidation ends the company. If this looks like the right path, we’ll tell you and refer you to a registered practitioner.

How the options compare →

Small business restructuring questions

What is small business restructuring (SBR)?

A formal process under Part 5.3B of the Corporations Act 2001 that lets an eligible small company propose a plan to its creditors, usually to pay part of what’s owed over time. The directors stay in control of the business, with a registered restructuring practitioner advising the company.

Is my business eligible for small business restructuring?

Eligibility criteria apply. They include total liabilities of no more than $1 million on the day the practitioner is appointed, no use of SBR or simplified liquidation by the company or its recent directors in the past 7 years, and employee entitlements and tax lodgements up to date before a plan is proposed. The practitioner confirms whether they’re met.

Does a restructuring practitioner take over my business?

No. The directors keep running the business day to day. The practitioner’s consent is needed for transactions outside the ordinary course of business.

Can ATO debt be included in a restructuring plan?

Yes, and the ATO’s vote is often decisive. SBR won’t remit a lockdown director penalty, or a penalty that wasn’t remitted within 21 days of the notice. Payments under the plan can reduce the director penalty, but the director stays liable for any balance.

How long does small business restructuring take?

The plan is usually prepared within 20 business days, which can be extended once by up to 10 business days. Creditors then usually have 15 business days to vote. If the plan is accepted, plan payments can run for up to 3 years.

Does small business restructuring affect my personal credit?

SBR is a company process, and it’s shown on the public ASIC company register. Personal guarantees are the main link to the directors personally: they’re paused during the restructuring, but can be enforced once the plan is made.

Can a sole trader do a small business restructure?

No. SBR is only for companies, not sole traders, partnerships or individuals. A sole trader’s business debt is personal debt, so informal arrangements or a debt agreement may be options instead.

See whether restructuring fits your business

Answer 5 quick questions about the business, then a specialist calls to go through restructuring and the alternatives.
Check your business optionsCall 1300 351 008
Debt Negotiators is a fee-based service. The information on this page is general and doesn’t take your circumstances into account. Outcomes depend on your situation, and no outcome is guaranteed. ACL 390820 · AFSA RDAA 1403.
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