What is Small Business Restructuring in Australia?

Small Business Restructuring (SBR) is a simplified insolvency process introduced under the Corporations Act 2001 in February 2021. It allows eligible incorporated small businesses (companies, not sole traders) with total debts under $1 million to restructure their debts while the directors remain in control of the business. A Small Business Restructuring Practitioner (SBRP) is appointed to help develop a restructuring plan that is put to creditors for a vote. If accepted, creditors receive the agreed amount and the company continues trading.

Who is eligible for Small Business Restructuring?

To be eligible for SBR, the company must: have total liabilities of less than $1 million at the time of appointment; have paid all outstanding employee entitlements (wages, superannuation, annual leave) up to the date of appointment; have all tax lodgement obligations current (BAS, income tax returns) up to the date of appointment; and not have used SBR or voluntary administration in the previous 7 years. The business must be an incorporated company — sole traders and partnerships cannot use SBR.

What is the difference between Small Business Restructuring and Voluntary Administration?

In SBR, directors stay in control of the business while the restructuring plan is developed (typically over 20 business days). In Voluntary Administration (VA), an external administrator takes full control of the company and its assets while a Deed of Company Arrangement (DOCA) is negotiated. VA is available to larger businesses (debts above $1 million) and those that cannot meet SBR eligibility criteria, but it is more disruptive because the administrator, not the director, runs the business during the process.

How long does Small Business Restructuring take?

Once an SBRP is appointed, there is a 20-business-day moratorium period during which creditors cannot take enforcement action. The SBRP has this period to work with the director to develop the restructuring plan. Creditors then have 15 business days to vote on the plan. If accepted by a majority in value, the plan becomes binding on all creditors. The full process typically takes 2 to 3 months from initiation to plan acceptance.

What happens to creditors in a Small Business Restructuring?

Creditors vote on the restructuring plan proposed by the SBRP. If a majority in value (more than 50% of the total debt value) vote in favour, the plan is accepted and binds all creditors, including those who voted against it. Creditors typically receive a cents-in-the-dollar payment under the plan, which may be better than what they would receive in a liquidation. Secured creditors and employee entitlements are treated separately and not usually subject to the plan.

Does restructuring affect the director personally?

SBR does not automatically affect the director personally, but directors should be aware that the SBRP will review the company's affairs including any director loans, related-party transactions, and evidence of insolvent trading in the period before restructuring. Directors who have provided personal guarantees to lenders or creditors will still be liable under those guarantees regardless of the restructuring outcome. Unpaid superannuation guarantee obligations that were lockdown DPN-eligible may also convert to personal liability.

What do my books need to show before a restructure can proceed?

For SBR, the company's books must clearly show: total creditor balances (to confirm the $1 million threshold is met), all employee entitlement liabilities (accrued leave, unpaid super) so they can be paid before appointment, a creditor list with amounts owed, and current tax lodgements. The SBRP will rely on the company's Xero or accounting file to build the restructuring plan, so incomplete or unreconciled books directly slow the process and increase the cost.

When a Small Business Restructure May Suit You

Published July 2026By Tiffany, True Tally Bookkeeping11 min read

The short answer: A small business restructure may suit you if the company is insolvent or near-insolvent but has a viable core business worth saving, total debts under $1 million, employee entitlements that can be brought current before appointment, and tax lodgements up to date. The Small Business Restructuring (SBR) process introduced in February 2021 lets directors stay in control while a practitioner develops a plan creditors vote on. It is faster and cheaper than Voluntary Administration for eligible businesses, and leaves liquidation as the path only when the business genuinely cannot continue.

Why a Restructure and Not Just Liquidation?

For a business in financial difficulty, liquidation often feels like the only option because it is the most visible one. But liquidation ends the business. It converts whatever assets remain into cash, distributes those funds to creditors in the order set by law, and ceases trading permanently.

Restructuring exists for a different situation: where the underlying business has real value, loyal customers, and a workforce worth keeping, but the debt load it is carrying makes it impossible to keep up with obligations as they fall due. The question a restructure answers is: can this business be viable if we reduce the debt to a manageable level?

If the answer is yes, restructuring produces better outcomes for creditors (who receive more than they would in a liquidation), employees (who keep their jobs), and the business owner (who retains a going concern). If the answer is no, liquidation is the honest path.

Small Business Restructuring: What It Is and Who Can Use It

The Small Business Restructuring (SBR) process was introduced in February 2021 under Schedule 2 of the Corporations Act 2001. It was designed specifically for incorporated small businesses that are insolvent or likely to become insolvent, and it addressed a gap in Australian insolvency law where the only formal options previously available (Voluntary Administration and liquidation) were both expensive and disruptive for small businesses.

SBR Eligibility Criteria

To access SBR, a company must meet all of the following at the time of appointment:

Total liabilities of less than $1 million (including contingent liabilities)
All employee entitlements paid up to date (wages, super, annual leave, long service leave)
All tax lodgements current (BAS, income tax returns, activity statements)
Has not used SBR, voluntary administration, or been in liquidation in the preceding 7 years
Must be an incorporated company (sole traders, partnerships, and trusts without a corporate trustee cannot use SBR)

The $1 million threshold is frequently misunderstood. It refers to total liabilities, not just ATO debt. A company with $400,000 in ATO debt, $300,000 in trade creditors, and $200,000 in bank debt has total liabilities of $900,000 and would be under the threshold. A company with the same ATO and trade creditor profile but $600,000 in secured bank debt would have $1.3 million in liabilities and would not be eligible.

SBR vs Voluntary Administration vs Liquidation: A Comparison

Feature	Small Business Restructuring	Voluntary Administration	Creditors Voluntary Liquidation
Eligible entity	Incorporated company only	Incorporated company only	Incorporated company only
Debt cap	Under $1 million	No cap	No cap
Director control	Directors stay in control	Administrator takes control	Liquidator takes control
Trading continues	Yes	Possibly (at administrator's discretion)	No
Creditor moratorium	20 business days	20 to 25 business days	Immediate on appointment
Outcome	Company continues under plan	DOCA or liquidation	Company wound up
Typical cost	Lower (SBRP fees)	Higher (administrator fees for full control period)	Moderate (liquidator fees)
Employee entitlements pre-appointment	Must be fully paid	Can be outstanding (become priority claim)	Can be outstanding (priority claim in liquidation)

The SBR Process Step by Step

Step 1: Assess Eligibility

Before approaching a Small Business Restructuring Practitioner (SBRP), the business needs to confirm it meets all eligibility criteria. This requires a current creditor listing (to check the $1 million threshold), a review of employee entitlement balances, and a check of ATO lodgement status. A bookkeeper who has the accounts in order can produce this information quickly.

Step 2: Pay Employee Entitlements

Any outstanding wages, superannuation, annual leave, and long service leave must be paid in full before or at the time of SBRP appointment. This is a hard eligibility gate, not a suggestion. Businesses that cannot afford to bring employee entitlements current may need to use Voluntary Administration instead.

Step 3: Appoint the SBRP

The directors resolve to appoint a registered SBRP. The moratorium begins. Creditors cannot take enforcement action, issue statutory demands, or apply to wind up the company during the moratorium period (20 business days).

Step 4: Develop the Restructuring Plan

The SBRP works with the directors to prepare a restructuring plan that offers creditors a return. The plan includes how much creditors will receive (in cents per dollar), when they will receive it, and how the business will fund the payments. The SBRP certifies that the plan is in the creditors' interests.

Step 5: Creditor Vote

Creditors receive the plan and have 15 business days to vote. A plan is accepted if more than 50% in value of the creditors who vote, vote in favour. If accepted, the plan binds all unsecured creditors, even those who voted against it. If rejected, the company enters liquidation.

What the Books Need to Show Before a Restructure

An SBRP relies heavily on the company's financial records to build the restructuring plan. Specifically, they need:

Required Information	Why the SBRP Needs It	Where It Comes From in Xero
Complete creditor listing with amounts	Confirms $1M threshold; identifies who votes	Accounts Payable aged summary
Employee entitlement balances	Confirm entitlements paid pre-appointment	Payroll liability reports
12-month P&L and balance sheet	Establish whether the business is viable	Financial reporting (reconciled)
ATO account balance and lodgement status	Confirm lodgements current; identify ATO debt	ATO portal / BAS agent access
Cash flow forecast (13-week minimum)	Show the business can fund ongoing trading during restructure	Xero Analytics Plus or manual forecast
Bank statements (12 months)	Identify unusual transactions and trading pattern	Bank feeds reconciled in Xero

When Restructuring Is Not the Right Answer

SBR works when the business has a real chance of continuing profitably once the historical debt burden is addressed. It does not work when:

The underlying business model is not profitable (the business would simply re-accumulate debt under the restructuring plan)
Total liabilities exceed $1 million
Employee entitlements cannot be funded before appointment
Key contracts or licences have already been lost
The ATO debt is in lockdown DPN territory and personal liability has already attached

In these situations, liquidation is the more honest path. It is not failure; it is the correct legal mechanism to end a business that cannot continue, and acting early gives creditors and employees the best possible outcome.

Watch: Small Business Restructuring Explained for Melbourne Businesses

Read the video transcript

If your business is struggling financially, you may have heard the term Small Business Restructuring and wondered whether it applies to you. Today I want to explain what it is, who can use it, and crucially, what your financial records need to look like before you can even start the process.

Small Business Restructuring was introduced in February 2021 as part of a reform to Australian insolvency law. It was designed to give small incorporated companies a way to deal with their debt without having to go into full Voluntary Administration, which is expensive and takes control away from the directors. Under SBR, the directors stay in control of the business throughout the process. A registered practitioner is appointed to help develop the plan, but the directors are still running the company day to day.

The key eligibility rules are: total debts under one million dollars, all employee entitlements paid up before the appointment, and all tax lodgements current. That last point catches a lot of businesses by surprise. If you have outstanding BAS returns or income tax returns, you cannot access SBR until they are lodged. Payment is separate from lodgement. You can have unpaid tax obligations and still use SBR, as long as the returns themselves have been submitted.

The process works like this. Once you appoint a practitioner, there is a 20-business-day moratorium where creditors cannot take action against you. During that time, the practitioner works with you to develop a restructuring plan that says, in effect: creditors, if you vote yes on this plan, you will receive this many cents in the dollar over this period of time. Creditors then have 15 business days to vote. If a majority in value vote yes, the plan is binding on everyone, including creditors who voted no.

What makes this work from a bookkeeping perspective is having clean, complete, up-to-date accounts. The practitioner needs to see a creditor listing that is accurate, a P and L that reflects what the business is actually earning, and a cash flow forecast that shows the business can survive during the restructuring period. If the books are a mess, the practitioner cannot certify the plan, the process stalls, and costs go up.

If you are a Melbourne business owner who is worried about the financial position of your company, the first step is understanding what your books actually show. We can help you get there. Book a free call at truetally.com.au or call us on 0468 159 950.

Tiffany Registered BAS Agent · Xero Certified Advisor · True Tally Bookkeeping
Last updated July 2026

Frequently Asked Questions

Can a sole trader use Small Business Restructuring?

No. SBR is available only to incorporated companies. Sole traders and partnerships have no equivalent formal restructuring process. Their options are informal creditor arrangements, personal insolvency (bankruptcy), or ceasing to trade.

What happens if creditors reject the restructuring plan?

If the plan is rejected, the moratorium ends and the company typically enters Creditors Voluntary Liquidation. The directors may still choose liquidation voluntarily, or a creditor may apply to the court for a compulsory winding up.

Do I have to bring super up to date before SBR?

Yes. All employee entitlements including superannuation must be paid in full before an SBRP can be appointed. This is one of the most common barriers to SBR for small businesses, since unpaid super often accumulates alongside unpaid ATO debt.

How is SBR different from an ATO payment plan?

An ATO payment plan is an informal arrangement with a single creditor. SBR is a formal legal process that binds all unsecured creditors and provides a legal moratorium on enforcement. ATO payment plans are appropriate where the ATO is the only significant creditor. SBR is appropriate where there are multiple creditors and the overall debt load makes an informal arrangement impractical.

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