Who qualifies for the Small Business Restructuring process in Australia?

To qualify for SBR, the company must have total debts (including contingent liabilities) of less than $1 million, all tax lodgements must be current (even if you owe money), the company must not have gone through a Small Business Restructuring or Voluntary Administration in the previous 7 years, and the company must not currently be subject to a director-initiated winding up. Employees must also have been paid out their entitlements, or arrangements must be in place to do so.

What happens during the 20-business-day plan development period?

After a Small Business Restructuring Practitioner (SBRP) is appointed, the company has 20 business days to develop and submit a restructuring plan to creditors. During this time, directors remain in control of the business and can continue trading. The SBRP's role is to review the company's financial position, assess whether the plan is in creditors' interests, and certify the plan before it goes to a creditor vote.

How do creditors vote on a Small Business Restructuring plan?

Creditors have 15 business days to vote on the plan after it is submitted. The plan passes if a majority in value of creditors who vote support it — meaning creditors holding more than 50% of the total value of accepted claims must vote yes. Related-party creditors (such as directors or their associates) are excluded from the vote. If the plan is rejected, the company typically proceeds to voluntary administration or liquidation.

How much does a Small Business Restructuring process cost?

Small Business Restructuring Practitioner fees typically range from $10,000 to $30,000 depending on the complexity of the business and the size of the debt. This is significantly cheaper than voluntary administration, which can cost $30,000 to $100,000 or more. The SBRP's fees are paid from the restructured company's assets as part of the plan, so the directors do not always need to fund this upfront — though this depends on the individual practitioner and the circumstances.

What happens if creditors reject the SBR plan?

If creditors vote to reject the plan, the moratorium on legal proceedings ends. At that point, the directors must decide their next step — most commonly voluntary administration or creditors voluntary liquidation. The SBR process does not itself force the company into liquidation; that decision sits with the directors. However, if the company remains insolvent after a rejected plan, continuing to trade exposes directors to insolvent trading liability under s588G of the Corporations Act.

Small Business Restructuring in Australia — How the 2021 SBR Process Works

Published May 2025By True Tally Bookkeeping8 min read

What Is the Small Business Restructuring Process?

The Small Business Restructuring (SBR) regime was introduced on 1 January 2021 under Part 5.3B of the Corporations Act. It was designed specifically for small businesses — giving companies with manageable debt levels a faster, cheaper path to restructuring without surrendering control to an external administrator.

Under SBR, directors remain in control of the business. A restructuring practitioner is appointed to assist — but unlike voluntary administration, they do not take over. The business keeps trading. The directors keep making decisions. The goal is to agree on a plan with creditors that allows the company to survive in some form.

This guide explains who qualifies, how the process works step by step, what a restructuring plan looks like, and what happens if creditors say no.

Who Can Use the SBR Process?

Not every business can access SBR. The eligibility criteria are specific:

Total debts under $1 million — this includes contingent liabilities (i.e. debts that might arise), not just what's currently due
Tax lodgements current — the company's tax obligations must be up to date with the ATO, even if amounts are outstanding
No prior SBR or Voluntary Administration in the last 7 years — you can't use the regime repeatedly
Employee entitlements paid or provided for — wages, super, and leave entitlements must be settled or a plan to pay them must be in place before the process starts
The company must be insolvent or likely to become insolvent

If any of these criteria aren't met, SBR isn't available. The next option is typically voluntary administration — which is more expensive and involves the directors handing over control.

Step by Step: How the SBR Process Works

1. Directors resolve to appoint a Small Business Restructuring Practitioner (SBRP)

The directors pass a resolution appointing a registered Small Business Restructuring Practitioner. The SBRP must be a registered liquidator — not just any insolvency advisor. From the moment of appointment, a moratorium begins: creditors cannot take legal action, issue statutory demands, or enforce security over company property.

2. 20-business-day plan development period

The company has 20 business days to develop a restructuring plan. During this period, directors keep running the business. The SBRP's role is to review the financial position, assess whether the proposed plan is in creditors' interests, and certify the plan before it's sent to creditors. The plan must be submitted within 20 business days — there's no extension mechanism under the legislation.

3. Creditors vote

Once the plan is submitted, creditors have 15 business days to vote. The plan passes if creditors holding a majority in value of accepted claims vote yes. Related parties — directors, their family members, associated entities — are excluded from voting. This prevents insiders from stacking the vote.

4. Plan is accepted or rejected

If accepted, the plan binds all creditors who were notified, whether or not they voted. If rejected, the moratorium ends and the directors must decide what comes next.

What Does a Restructuring Plan Look Like?

The plan itself is a document that sets out what creditors will receive. Common structures include:

Lump sum payment — the company (or a third party, often a director's family member) pays creditors a fixed amount in full and final settlement
Reduced payments — creditors accept cents in the dollar on their debt (e.g. 40 cents per dollar over 24 months)
Extended terms — creditors agree to be repaid in full but over a longer period

The plan must be certified by the SBRP as being in the best interests of creditors — meaning creditors would receive more under the plan than they would if the company went into liquidation. If that test isn't met, the SBRP won't certify it and the plan can't proceed.

How SBR Differs from Voluntary Administration

The fundamental difference is control. In voluntary administration, the administrator takes control of the company on day one. Directors step back. In SBR, directors retain control throughout. This matters for several reasons:

Customer and supplier relationships are less disrupted — no external administrator is answering the phone
Directors can continue making operational decisions without sign-off from a practitioner
The process is faster and, typically, cheaper

Costs reflect this: VA typically runs $30,000–$100,000+ in practitioner fees. SBR practitioner fees typically run $10,000–$30,000, depending on complexity. For a small business with under $1M in debt, that difference matters.

What Happens If Creditors Reject the Plan?

If the plan is rejected, the moratorium ends immediately. Creditors can resume legal proceedings, enforce security, and issue statutory demands. The directors face a choice:

Place the company into voluntary administration
Resolve to wind the company up (creditors voluntary liquidation)
Continue trading — but this carries significant personal risk if the company is insolvent (see our article on trading while insolvent)

A rejected SBR plan doesn't mean the process failed entirely — it clarifies where things stand and forces a decision that might otherwise be delayed too long.

True Tally: Clean books before any restructuring process

Any restructuring process — SBR, VA, or otherwise — starts with accurate financials. If your books aren't in order, you can't know your true position and neither can the practitioner. Talk to us about getting your accounts sorted.

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