Can a trades business restructure debt while continuing to trade?

Yes. Most restructuring options available to Australian small businesses — including ATO payment arrangements, informal creditor workouts, and Small Business Restructuring — allow you to keep trading while you work through the debt. Voluntary administration and liquidation are different: VA allows trading to continue under the administrator's control, while liquidation ends the business. In the majority of cases where a trades business acts early enough, continuing to trade is possible and preferable.

What is the minimum I need to do to qualify for Small Business Restructuring?

To access the Small Business Restructuring process, your total liabilities must be under $1 million (excluding employee entitlements), your tax lodgements must be current (all BAS, income tax, and other returns lodged — even if unpaid), and you must not have been through another formal insolvency process in the previous seven years. Getting your lodgements current is often the first job before a Small Business Restructuring Practitioner can be appointed.

What happens to my subcontractors and suppliers if I restructure?

In an informal workout, you negotiate directly with creditors — subcontractors and suppliers may agree to a payment plan or partial settlement. In Small Business Restructuring, a restructuring plan is proposed to creditors (including suppliers), who vote on it. If the plan is accepted, creditors are bound by its terms. Outstanding invoices to subcontractors for work already done are debts of the business and need to be addressed in whatever restructuring process you use.

Will restructuring affect my trade licences?

Licensing obligations vary by state and licence type. In Victoria, VBA licensing (for builders, plumbers, and electricians) requires the holder to meet fit and proper person criteria. Entering voluntary administration or liquidation can trigger a review of your licence. Informal arrangements or ATO payment plans typically do not affect licensing. If you hold a trade licence, this is an important area to get professional advice on before entering any formal insolvency process.

How do I know if my trades business is insolvent?

A business is insolvent when it cannot pay its debts as and when they fall due. Practical signs include: you're relying on a director loan to fund payroll, your BAS payments are 90+ days late, suppliers have placed you on credit hold, you're juggling who to pay each week, or your bank account regularly runs to near-zero before income arrives. If you recognise more than one of these, talk to a qualified adviser — a bookkeeper or accountant — before the situation becomes unmanageable.

Restructuring Options for Trades Businesses in Australia

Published May 2025By True Tally Bookkeeping7 min read

Signs Your Trades Business Needs More Than a Budget Tighten

A bad month is normal in trades. Two bad months in a row is worth watching. But there are specific signs that signal something more serious than a cashflow blip:

ATO debt that has been outstanding for more than 90 days with no payment plan in place
Suppliers withdrawing credit or demanding payment upfront before materials ship
Using a director loan or personal savings to cover payroll or super
BAS lodgements behind by more than one quarter
Juggling which creditor to pay each week to keep operations moving
Superannuation unpaid — even if you're meeting wages

If you recognise more than two of these, this isn't a cashflow management problem. It's a restructuring conversation.

Option 1: ATO Payment Arrangement and Lodgement Cleanup

This is the first port of call for most trades businesses with ATO debt — and it's often the most cost-effective option when debt is primarily with the ATO and the business is still viable.

An ATO payment arrangement lets you pay your outstanding tax debt in instalments over an agreed period (typically 12–24 months, sometimes longer). The ATO charges general interest charge (GIC) on outstanding amounts, but it does not charge penalty interest on formally agreed arrangements.

What you need before calling the ATO:

All BAS lodgements current — the ATO will not negotiate a payment arrangement on unreported periods. They need to know what the full debt is
Income tax returns lodged for all years
A clear picture of your cashflow — what you can genuinely afford per month

This is where a registered BAS agent is genuinely valuable. We get your lodgements current first, so you're negotiating from an accurate position — not scrambling to explain why nothing has been lodged for 18 months.

Before you call the ATO, talk to us first

We've helped trades businesses across Victoria get their lodgements current and negotiate from a stronger position. Book a free 20-minute call — no obligation, no lock-in.

Book a Free 20-Minute Call

Option 2: Informal Workout with Creditors

An informal workout means negotiating directly with your creditors — without involving a formal insolvency practitioner or court process. This is a viable option when:

Your debt is concentrated (a few large creditors rather than dozens of small ones)
You have ongoing relationships with the creditors (regular suppliers who want to keep your business)
The business is fundamentally viable — the problem is cash timing, not structural

A typical informal workout might involve: extended payment terms on outstanding invoices, a partial write-off of the debt in exchange for immediate payment of the balance, or a structured repayment plan agreed directly between you and the creditor.

The advantage of this approach is speed and flexibility — there's no court process, no insolvency practitioner fee, and you maintain full control. The disadvantage is that there's no legal binding on creditors who don't agree, and any creditor who won't play along can still pursue legal action.

Option 3: Small Business Restructuring

Small Business Restructuring (SBR) is a formal insolvency process introduced in 2021 specifically for small businesses with total liabilities under $1 million. It's designed to let viable businesses restructure their debts while the director stays in control of day-to-day operations.

How it works:

A Small Business Restructuring Practitioner (SBRP) is appointed — this is a registered liquidator who assists the director to develop a restructuring plan
The director continues running the business during the process
A plan is put to creditors (including the ATO) within 20 business days
Creditors vote — if the majority by value accept, all creditors are bound by the plan
The SBRP oversees implementation of the plan

The key eligibility requirement is that all tax lodgements must be current before the process starts. This is where many trades businesses fall over — they can't access SBR because their BAS is 18 months behind.

For more detail on this option, see our post on Small Business Restructuring in Australia.

Option 4: Voluntary Administration

Voluntary Administration is a formal process where an independent administrator takes control of the company to assess whether it can be saved. It's appropriate when SBR won't work — usually because the debt is over $1 million or because creditors couldn't agree on an SBR plan.

During VA, most legal action against the company is paused (the "moratorium"), giving breathing room to develop a Deed of Company Arrangement (DOCA) for creditors to consider. The administrator can also recommend liquidation if the company isn't viable.

VA is significantly more complex and expensive than SBR, and the director cedes control to the administrator. It's not the right first step — but it's a legitimate path when earlier options have been exhausted.

For a full comparison, see our post on Voluntary Administration vs Liquidation.

Option 5: Creditors Voluntary Liquidation

When the business genuinely cannot be saved — the debts are too large, the business model is broken, or the director no longer wants to continue — Creditors Voluntary Liquidation (CVL) is the orderly way to wind up.

In a CVL, the company's director appoints a liquidator, who then takes control, realises the assets, and distributes proceeds to creditors in the prescribed order. The company is deregistered at the end of the process.

CVL is not the same as personal bankruptcy — it affects the company, not you personally (unless you've personally guaranteed debts). For many directors, a CVL gives a clear end point and allows them to start again in a new structure.

We'll tell you exactly what's missing and what to do first

If you're behind on lodgements and not sure where to start, book a free call. We'll review your situation, tell you what needs to be done first, and give you a realistic picture — with no obligation to proceed.

Book a Free 20-Minute Call

What to Do Today If You Recognise Your Situation

If this post has described your business, here are three concrete steps to take right now — in this order:

Get lodgements current. Every option above requires up-to-date tax lodgements. Before you can negotiate, you need to know what you actually owe. A registered BAS agent can get outstanding BAS lodgements done quickly, even if the records are messy.
Get your books updated. You need a current, accurate picture of your financial position — what you owe, to whom, and what's coming in. A bookkeeper can produce this even from incomplete records.
Talk to a BAS agent or bookkeeper before calling the ATO. The ATO has more flexibility than most business owners realise — but only if you approach them with accurate, complete information. Going in blind is the worst way to start that conversation.

The businesses that recover are the ones that act early. Every week you wait makes the options narrower.

Restructuring Options When Your Trades Business Is Struggling