Wondering if your company qualifies for Small Business Restructuring (SBR)? Many directors find themselves asking this question when facing debt—especially ATO debt—challenges. Understanding the eligibility criteria helps you determine whether this powerful debt solution could work for your situation.
While SBR offers significant benefits, it's designed for specific situations. Let's explore the requirements to help you understand if this solution aligns with your circumstances.
Core eligibility requirements at a glance
Meeting the eligibility criteria for Small Business Restructuring involves several key elements. Understanding these requirements early helps you assess whether SBR provides a viable option for your company.
Your eligibility assessment should start with these fundamental requirements:
Company structure
The type of business structure you operate plays a crucial role in eligibility. SBR is specifically designed for incorporated businesses facing financial challenges:
Must be a registered company (Pty Ltd)
Cannot be a sole trader or partnership
Directors must not be bankrupt
Company must not be in external administration
Must not already be under a deed of company arrangement
Compliance requirements
Your company's compliance status significantly affects eligibility. Meeting these requirements demonstrates your commitment to responsible business management:
Tax lodgements substantially up to date
Employee entitlements paid or able to be paid
No previous SBR in the past 7 years by the company or any of its directors
Directors compliant with duties and obligations
Company books and records must be up to date
Debt limits
The total amount your company owes represents a critical factor in SBR eligibility. Understanding what counts toward this limit helps you assess your position accurately:
Total unsecured liabilities under $1 million on the SBR start date
Unsecured debts include all general debts including ATO debts for BAS and tax, suppliers, landlords, unsecured loans (fast internet loans), and credit cards / AMEX
Unsecured debts do not include secured debts which must be registered on the PPSR and also excludes employee entitlements (wages, super and leave which are currently due and payable)
Includes related party loans (unless secured or forgiven before SBR start date)
Does not include equipment finance loans which will be secured debts on the PPSR
Understanding the $1 million liability limit
The $1 million threshold represents one of the most important eligibility criteria for SBR. Understanding exactly what counts toward this limit helps you accurately assess your situation.
This figure includes more than just obvious debts. Here's what counts toward your total:
What's included in the limit:
The threshold encompasses various types of financial obligations:
ATO debts (including BAS / IAS for GST and PAYG)
Trade creditor debts
Bank loans and overdrafts
Director and shareholder loans
Related company liabilities
Contingent liabilities including potential legal claims not yet quantified and disputed debts
Future dated payment obligations
What's not included in the threshold:
Some potential obligations don't count toward the limit:
Future lease payments beyond current obligations
Secured debts which are subject to a valid registration on the PPSR
Equipment and vehicle finance loans which will be secured debts on the PPSR
Employee entitlements including wages, superannuation and leave entitlements, which must be paid if currently due and payable, otherwise accrued amounts not yet due are excluded
Employee entitlements requirement
Managing employee entitlements properly plays a crucial role in SBR eligibility. This requirement helps protect worker interests while demonstrating responsible business management.
Your company must show it has addressed employee obligations appropriately:
Current entitlements
Proper management of employee entitlements proves essential:
Paid all employee entitlements that are due, or
Have the resources to pay them before creditors vote
Must include superannuation guarantee amounts
What's covered
Understanding which entitlements matter helps ensure compliance. It only includes the following amounts which are currently due and payable:
Wages and superannuation
Annual leave entitlements
Long service leave
Any redundancy obligations
Personal/carer's leave accrued
Notice period entitlements
Accrued amounts not yet due, such as holiday leave not yet taken, is excluded from any calculations.
Tax lodgement requirements
While perfect compliance isn't mandatory, maintaining substantially up-to-date tax obligations represents another key eligibility factor. This requirement helps demonstrate your commitment to meeting business obligations.
Essential lodgements
The following key tax reporting obligations must be lodged if the due date for lodgements has passed:
Business Activity Statements (BAS)
Instalment Activity Statements (IAS)
Income tax returns
Single Touch Payroll reporting
Superannuation Guarantee Charge statements
PAYG withholding annual reports
What "substantially compliant" means
Understanding what constitutes substantial compliance helps assess your position:
All lodgements which are due, must be lodged
Recent lodgements completed
Clear intention to maintain compliance
Active engagement with tax obligations
No deliberate avoidance of obligations
Director requirements
Directors play a crucial role in SBR eligibility. Personal circumstances and past actions can affect your company's ability to access this solution.
Personal requirements
Several factors affect director eligibility:
Not be currently bankrupt
Not have used SBR for another company in the past 7 years
Be compliant with director duties
Provide required information to the practitioner
Act in good faith throughout the process
Documentation needed
Being prepared with key documents speeds up the eligibility assessment:
Personal asset and liability statement
Access to accounting records such as Xero, MYOB or Quickbooks, or accounting print-offs
Statement of company background and causes of financial difficulty
Details of funds available to contribute from company funds, personal funds or future trading profits
Proposed restructuring plan approach
Checking your eligibility
Assessing your eligibility involves reviewing multiple aspects of your business situation. Taking a systematic approach helps ensure you don't overlook important factors.
We follow these steps to assess your situation:
Calculate total liabilities: First, understand your complete debt position:
List all debts and obligations
Get accurate current balances from your company accounts
Consider upcoming payments
Review all security registrations on the PPSR
Review compliance: Check your compliance status carefully:
Check ATO lodgement status
Verify employee payments including superannuation
Review director status
Check company registration
Assess reporting obligations
Gather documentation: Prepare key information for assessment:
Recent financial statements
ATO running balance account
Employee entitlement records
Asset and liability lists and valuations
Management accounts
Next steps
Understanding whether your company qualifies for Small Business Restructuring represents an important first step. The next stage involves exploring how this solution could help your specific situation.
Contact our team for a confidential discussion. We'll help you:
Confirm your eligibility
Understand your options
Plan your next steps
Make informed decisions
Remember: The sooner you explore your options, the more opportunities you'll have to address your company's challenges effectively.
Read next: The SBR process explained: Your week-by-week breakdown of Small Business Restructuring
Previous: Why Small Business Restructuring (SBR) could be your company's lifeline
Or back to: Small Business Restructuring (SBR) Guide for Company Directors
