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The small business restructuring (SBR) process is an insolvency reform implemented by the Australian Government. It came into effect in January 2021 to replace the Government’s COVID stimulus measures.

Essentially, an SBR allows eligible businesses to:

• negotiate with creditors via a streamlined and affordable process;

• restructure their debts by reducing them and allowing time to pay; and

• continue operating while directors stay in control throughout the process.

If you are hoping to use the SBR process for your small business, there are clear eligibility criteria.

To be eligible, your business must:

• be a small business facing insolvency

• be a company (Pty Ltd entity)

• be substantially complying with obligations to lodge returns with the Australian Tax Office (ATO)

• have paid employee entitlements including superannuation.

Your business must not:

• have total liabilities that are over $1million (excluding secured and related-party debts)

• already be subject to an insolvency administration.

You can read all about the steps in the SBR process, including what happens afterwards, in our quick guide to the small business restructuring process.

Yes! You and your employees keep working and your business keeps running as usual.

Unlike other insolvency engagements, as director you retain complete control over your company while it continues trading. Meanwhile, your restructuring practitioner runs the SBR process with the included creditors.

The outcomes of an SBR differ from business to business. Some businesses can’t successfully restructure their debts via an SBR, so insolvency is a better option.

But if your SBR is successful (at Business Reset we have a 98 percent success rate in getting SBRs accepted by the ATO), you’re looking at these potential benefits:

Debt goes down - What you owe to creditors can be reduced by 60-80%, making your debt manageable and improving your financial position.

Cashflow gets better - By reducing your debt payments or extending your repayment period, your cash flow woes can be alleviated.

You avoid insolvency - There’s no need for you to lose money and time on an insolvency process.

Your doors stay open - The SBR process allows you to keep trading while your debts are being restructured.

You stay in control - You run your business, while we manage your debt through the SBR process.

While there’s no minimum debt level to be eligible for an SBR, you want to make sure that the money you save outweighs the cost of the SBR.

So, how much does the average SBR process cost? In 2023 ASIC put the median cost at $22,055.

On a $50,000 debt, we’d expect your payments for the cost and creditors to be about $25,000, which would effectively reduce your debt by $25,000.

To be eligible for the SBR process, your company’s debts must be under $1million on the date it signs the paperwork to appoint a restructuring practitioner. Any invoices from suppliers or debts incurred after that date aren’t included in the SBR – they must be paid by you in the ordinary course of business.

Calculating whether your company has less than $1million in total liabilities can be a little confusing – our Business Reset team can help you work this out.

Included in the $1million limit:

• Debts to trade creditors

• ATO debts

• Shareholder loans (although it may be possible to reduce the balance beforehand)

• Payroll taxes and other statutory debts

Not included in the $1million limit:

• Superannuation and employee entitlements. While it’s preferable to pay super beforehand, there’s a four-week window after the SBR starts during which these debts may be paid, before your proposed restructuring plan is put to creditors.

• Secured creditor debts to the value of the secured assets available to meet the debt. For example, a bank loan secured over your company assets with equal or greater value than the loan will not be included in the $1million calculation.

• Finance agreements for motor vehicles. If the asset is worth less than the debt, then only the shortfall is included in the $1million calculation.

Yes and no.

• No, if you’re a company director or former director (who ceased in the previous 12 months) who has already used the SBR process for one company.

• But yes, if all the SBRs begin within 20 business days of each other.

Each SBR is considered a separate appointment and each company must:

1. meet the SBR eligibility requirements; and

2. be a "related body corporate", meaning it must either be a holding company or a subsidiary of the same corporate group.

Generally, no – the company and director are separate.

However, the restructuring practitioner is required to conduct an assessment for comparison by creditors of the estimated return they would receive in the hypothetical scenario of a liquidation. This assessment would consider any claims a liquidator may pursue against the director. This could include where a director has taken drawings instead of wages, an asset loan balance that if repaid to a liquidator, would enable a certain return to creditors. In that case, we may need to increase the SBR return to be comparable to the liquidation.

If you do have equity in your house, you may wish to consider refinancing your home loan to obtain funds to pay out your SBR sooner. There could be various benefits of doing this, such as having the SBR behind you within eight weeks, clearing your company credit report sooner, or freeing up cash flow for your business. Business Reset can put you in touch with specialist lenders that can provide mortgage finance under an SBR.

We consider potential issues like this during the company’s SBR planning session.

Yes. There are actually benefits to this:

• It shows the ATO that your company is genuinely attempting to comply with their ongoing ATO reporting and payment obligations.

• If your company proposes to pay its SBR contributions in monthly instalments, an ATO payment plan demonstrates that it’s able to maintain regular payments.

Preferably, yes. Outstanding super should be paid in full before an SBR starts. However, you can start an SBR if overdue super can be paid within four weeks, before the deadline to formally issue the SBR proposal to creditors.

We can review this for you and advise on an appropriate start date. 

It’s important to note two things:

• Super owed to you as the director, your spouse or your relatives only requires payment of the first $2,000. Any balance is included as a claim by the ATO in the SBR.

• Super for the current quarter only needs to be paid by the usual quarter due date.

Keep in mind that your company probably won’t be able to obtain loans or credit facilities from any major bank while it has an ATO debt. So, although an SBR will impact your company credit file, it will ultimately strengthen your company’s financial position – meaning its creditworthiness will be better than it is now.

These are some important impacts to consider:

ASIC status

Your company will be noted with ASIC as in ‘external administration’ during the small business restructuring period (generally seven weeks). Once the plan is accepted by creditors, your company’s status will revert to normal ‘registered’ status.

The appointment is also posted on the ASIC Insolvency Notices website. Although this is public, there’s generally limited awareness outside of included creditors.

Commercial credit reporting

Anyone who subscribes to credit reporting on your company will be notified of an SBR appointment. In our experience, suppliers will likely place your company on cash-on-delivery (COD) during the SBR period. It’s rare for this notification to cause ongoing issues. If it does, we can help by providing a letter clarifying the process. 

While the ‘external administration’ label only shows on your ASIC record during the restructuring period, it shows on your company’s credit file until the restructuring plan is paid in full and finalised. This could be from one week to more than two years if you opt for a payment plan. This could cause difficulties obtaining finance for the term of your restructuring plan.

Once the SBR is finalised, your credit score will be reinstated. Your company’s credit report will include the two SBR periods as former external administrations, recording the dates of:

• the restructuring period

• the plan period.

Personal credit reporting

We haven’t seen existing personal loans or finance impacted by an SBR. As a director, your personal credit file is not directly impacted by an SBR. But it will raise queries if you apply for finance.

Likewise, if you’re applying for personal finance, your company’s ATO debt may also cause difficulties. The SBR process aims to improve the financial position of your company, so once it’s done you’ll be better placed to support any home loan or finance application in future. Business Reset can put you in touch with specialist lenders that can provide mortgage finance under an SBR.

No. The SBR process is limited to the company and its unsecured creditors. It’s designed to protect directors from being personally impacted by unmanageable company debts.

Yes and no. AMEX and credit card providers will participate in the SBR if they’re owed a debt. They will receive a return as an unsecured creditor. However, because AMEX and credit cards are personally guaranteed debts, arrangements need to be made to pay down their debt separately via instalments outside the SBR.