This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances.
What Is Small Business Restructuring?
Small Business Restructuring (SBR) is a formal insolvency process introduced under Part 5.3B of the Corporations Act 2001 (Cth) on 1 January 2021. It was designed specifically for small businesses facing financial distress — providing a faster, lower-cost alternative to voluntary administration that allows directors to retain control of their company while working out a plan to repay creditors.
In simple terms: rather than handing your company to an administrator and losing control of your business, small business restructuring lets you stay in the driver’s seat while a Small Business Restructuring Practitioner (SBRP) helps you develop and implement a formal restructuring plan.
As Australia’s insolvency laws face renewed scrutiny in 2026 — including the World Bank’s B-Ready review and government consideration of further insolvency reforms — understanding the SBR process is more important than ever for Queensland business owners and their directors.
Who Is Eligible for Small Business Restructuring?
Not every company can access the SBR process. To be eligible, your company must meet all of the following criteria:
- Total liabilities of $1 million or less (excluding certain employee entitlements and amounts owed to related parties).
- The company is insolvent or likely to become insolvent.
- All tax lodgements are up to date (BAS, income tax returns, and FBT returns must be lodged — but not necessarily paid).
- All employee entitlements that are due and payable have been paid, including superannuation guarantee contributions.
- The company has not used the SBR process in the last seven years, and neither has the director in a different company.
The eligibility requirements are strict — particularly the requirement to have tax lodgements current and employee entitlements paid. This is often where small businesses fall short. If your company has outstanding ATO obligations, seek legal advice immediately, as there may be steps you can take to restore eligibility.
How Does the Small Business Restructuring Process Work?
The SBR process follows a defined timeline and involves several key stages:
Step 1: Appoint a Small Business Restructuring Practitioner (SBRP)
The directors of the company resolve to appoint a registered liquidator as the SBRP. Unlike voluntary administration, the SBRP does not take control of the company. The directors remain in control and continue to trade the business throughout the process. The SBRP acts as an adviser and gatekeeper — helping develop the restructuring plan and certifying its terms.
The appointment triggers an automatic moratorium on creditor enforcement action. During the restructuring period, secured creditors cannot enforce their security (except in limited circumstances), unsecured creditors cannot commence or continue legal proceedings to recover debts, and landlords cannot terminate leases for pre-existing defaults.
Step 2: Develop the Restructuring Plan (20 Business Days)
The directors, with the assistance of the SBRP, have 20 business days from the appointment to prepare and propose a restructuring plan. The plan must include:
- The amount to be paid to creditors and the timing of payments.
- How the plan will be funded (from trading revenue, asset sales, or third-party investment).
- The SBRP’s certification that the plan is in the creditors’ best interests and that the company is likely to be able to comply with its terms.
The SBRP will not certify a plan they believe cannot be funded or implemented. Early, honest engagement with your SBRP is critical to developing a viable plan.
Step 3: Creditor Vote (15 Business Days)
Once the plan is proposed, creditors have 15 business days to vote on it. The plan is approved if a majority in value of creditors who vote (excluding related party creditors) vote in favour. There is no meeting requirement — voting is conducted electronically or in writing.
If the plan is approved, it binds all unsecured creditors — including those who voted against it. This is a powerful mechanism: a majority can impose the plan on a minority of dissenting creditors.
Step 4: Implement the Plan
If approved, the SBRP oversees implementation of the plan — receiving payments from the company and distributing them to creditors in accordance with the plan’s terms. The directors continue to manage the business.
If the plan is not approved by creditors, the company typically moves to voluntary administration or liquidation. The directors will need to take urgent further advice.
SBR vs Voluntary Administration: What’s the Difference?
Many business owners confuse small business restructuring with voluntary administration (VA). They are different processes with different outcomes:
| Feature | Small Business Restructuring | Voluntary Administration |
|---|---|---|
| Director control | Retained | Lost (administrator takes control) |
| Creditor meeting | Not required | Required (two meetings) |
| Eligibility threshold | Liabilities ≤ $1 million | No threshold |
| Timeline | ~35 business days | ~40+ business days |
| Cost | Generally lower | Generally higher |
| Outcome | Restructuring plan or liquidation | DOCA, deed of company arrangement, or liquidation |
For companies under the $1 million threshold, SBR is almost always preferable to VA — it is faster, cheaper, and keeps the directors in control. However, if there are complex creditor dynamics, related party issues, or the business is not viable, voluntary administration may be more appropriate.
For a detailed comparison, see our guide to insolvency options for Queensland businesses.
What Happens to Secured Creditors Under SBR?
Secured creditors (such as banks with registered security interests under the PPSA) are treated differently to unsecured creditors under the SBR process. The restructuring plan can only deal with unsecured debts. Secured creditors retain their security interests and are not bound by the plan in relation to their secured claims.
This means that if your company has significant secured debt (for example, a bank with a general security agreement over the company’s assets), the SBR process may not be sufficient to resolve the company’s financial difficulties. Broader restructuring advice will be needed.
Director Liability During the SBR Process
One of the key advantages of SBR is that it provides directors with some protection from personal liability for insolvent trading. When a company is undergoing SBR, the directors’ duty not to trade while insolvent (s 588G) is modified — directors cannot be found liable for insolvent trading debts incurred during the restructuring period, provided those debts are incurred in the ordinary course of business and in good faith.
This is similar (but distinct) from the safe harbour provisions available to directors who take a course of action reasonably likely to lead to a better outcome for the company. Both mechanisms are important tools for directors facing financial distress. Seek legal advice on which applies to your situation.
Can the ATO Vote Against the Plan?
Yes — and this is a critical practical issue. The Australian Taxation Office (ATO) is often the largest unsecured creditor of distressed small businesses. The ATO has a specific policy on participating in SBR processes and voting on restructuring plans.
The ATO will generally support plans where:
- The plan represents a better return for the ATO than liquidation.
- Tax lodgements are current (a condition of entering SBR).
- There is no ongoing phoenix risk (the ATO actively monitors for phoenix activity in distressed company restructures).
Engaging proactively with the ATO — through your SBRP and legal advisers — before the creditor vote is essential. A surprise ATO vote against your plan can derail the entire process.
2026 Update: Australia’s Insolvency Laws Under Review
Australia’s insolvency framework is under active review in 2026. The World Bank’s B-Ready review is assessing Australia’s business-rescue mechanisms — including whether the SBR process is fit for purpose. At the same time, the federal government is considering further reforms, including:
- A potential reduction of the default bankruptcy period from three years to one year.
- Whether the $1 million liability threshold for SBR should be increased to capture more distressed businesses.
- Further integration of SBR with the ATO’s payment plan and debt compromise processes.
Queensland business owners should monitor these developments — and seek advice now rather than waiting for reform to arrive. The current SBR process provides real protections that are available today.
Frequently Asked Questions
How much does small business restructuring cost?
The cost of an SBR process depends on the complexity of the company’s affairs, the number of creditors, and the nature of the restructuring plan. SBRP fees are typically lower than voluntary administration fees because the process is less intensive. However, you should also budget for legal advice from a commercial lawyer experienced in insolvency matters — particularly to assess eligibility, advise on plan terms, and manage creditor relations. Contact Boss Lawyers for an obligation-free discussion of your situation.
Can I use SBR to deal with a statutory demand?
If your company has received a statutory demand, you must act within 21 days — either by paying the debt, reaching agreement with the creditor, or applying to court to set aside the demand. Appointing an SBRP will trigger the moratorium, which pauses enforcement action, but the 21-day clock for responding to a statutory demand may already be running. Seek urgent legal advice if you have received a statutory demand and are considering SBR.
What happens if the restructuring plan fails?
If the company fails to comply with the approved restructuring plan (for example, by missing payment obligations to creditors), the SBRP can terminate the plan. Once the plan is terminated, the company will typically enter voluntary administration or creditor-initiated liquidation. Directors lose the protection from insolvent trading claims that applied during the restructuring period for debts incurred after the plan’s termination.
Can a director of a company under SBR still be personally liable?
Yes, for debts incurred outside the restructuring period and for pre-existing insolvent trading claims. The SBR process does not extinguish pre-existing personal liability for insolvent trading. If ASIC or a liquidator pursues an insolvent trading claim, the fact that the company subsequently entered SBR does not shield the director from liability for debts incurred before the SBR appointment. This is why early legal advice for directors is critical.
Mark Harley is the Principal Solicitor at Boss Lawyers, a boutique commercial litigation and insolvency law firm in Brisbane. Boss Lawyers advises directors, creditors, and business owners across Queensland on insolvency options, including small business restructuring, voluntary administration, and insolvent trading defences. For strategic advice specific to your situation, contact us on 1300 267 711 or through our online enquiry form.
