By Seth Cooper, Senior Insolvency Analyst
Small Business Restructures (SBRs) were introduced to help struggling companies deal with solvency issues without having to go through a formal insolvency appointment. They remain a viable solution for businesses willing to make an appropriate offer to creditors and address any major internal issues they face.
Many businesses going through a SBR are dealing with issues outside their control. Sometimes it’s industry pressures, sometimes it’s cash flow, delayed payments or supply issues, particularly in industries like construction. Other times, it’s broader economic pressures or personal circumstances that have put the company into a difficult position.
What makes SBRs different is that it gives companies the opportunity to address solvency issues without immediately entering a formal liquidation.
Compared to liquidation or voluntary administration, a SBR is much less invasive. It allows companies to continue trading while they work through a proposal to compromise their debts with creditors. If creditors accept the proposal, the company can move forward in a much stronger financial position.
From a creditor’s perspective, it can also produce a much better outcome than liquidation. In a liquidation scenario, the odds of unsecured creditors receiving anything back are generally pretty low. Through a SBR, creditors generally receive anywhere from 20 to 60 cents in the dollar (depending on the company’s/Director’s financial capabilities), which is obviously a much better outcome than receiving nothing.
Another important difference is that if a restructuring plan is not accepted, the company is not automatically forced into liquidation. That’s very different to voluntary administration, where a failed proposal can lead directly into liquidation, and the company stops trading.
The Current State of Play With SBRs
Source: Alares Credit Risk Insights, May 2026SBRs remain a viable solution and present a great opportunity for companies willing to make an appropriate offer and address the major issues they’re struggling with.
The 2025 financial year was really the peak for SBR appointments across Australia, with around 3,000 appointments recorded. Since then, appointment numbers have dropped back to levels closer to the 2024 financial year, with current figures expected to finish at around 1,200 to 1,400 appointments Australia-wide at the end of the 2026 financial year.
Source: Alares Credit Risk Insights, May 2026There definitely seems to be a bit of a lull in the market at the moment.
Part of that appears to come down to how the ATO is approaching restructuring plans. Earlier on, it felt like a very high percentage of plans were being accepted. Now, the ATO seems to have settled into a much firmer framework around what they will and won’t support.
Because the ATO is generally the major creditor in these matters, it often becomes the deciding vote on whether a plan succeeds.
How the SBR Process Works
The process usually starts with an initial conversation with the director about the company’s position, financial capacity, debt levels and whether the business is actually suitable for an SBR.
That first conversation is really important because there’s no point putting a company through a restructuring process if there are better options available. Sometimes, liquidation or voluntary administration are genuinely the better financial outcome for both directors and creditors.
If the company is eligible and a SBR is considered the right option, the appointment begins, and the restructuring practitioner requests the company’s financial information, generally covering the previous four financial years.
That information is crucial because it forms the basis of the investigations into the company and the major report that will ultimately be sent to creditors.
An initial report is then issued to creditors confirming the commencement of the restructuring and outlining the current debt position.
Once the financials are received, work begins on drafting the major report to creditors and helping the company formulate an offer. That report outlines the company’s position, the investigations undertaken and why creditors should consider accepting the proposal.
The report must generally be provided to creditors within 20 business days, although an extension may be granted in certain circumstances.
Where possible, a draft version is often sent to the ATO beforehand so feedback can be obtained before the report is formally issued.
Once finalised, the proposal is sent to creditors, who then have 15 business days to vote on the restructuring plan.
If the plan is accepted, the company enters the restructuring plan period and continues trading while the plan’s terms are monitored. Once all funds are received, distributions are paid to creditors, and the restructuring is finalised.
What a Good Restructuring Plan Looks Like
A good restructuring plan is one that provides creditors with a higher return than what they would likely receive through liquidation while also allowing the company to continue trading.
The best plans are mutually beneficial. The company gets the opportunity to continue operating and maintain relationships with creditors, while creditors receive a better financial outcome than they would through a formal liquidation.
The Biggest Mistakes Directors Make
The biggest issue during the restructuring process is usually that directors do not provide information promptly or remain engaged throughout the appointment.
The process moves very quickly, and there are strict deadlines for reporting to creditors. If financial information is delayed, valuable time is lost almost immediately.
It’s also important for directors to understand that appointing a restructuring practitioner doesn’t mean they can step back from the process. There will be questions, requests for additional information and ongoing discussions throughout the appointment.
Trusted advisors such as accountants and lawyers can make a huge difference here by helping directors prepare all financial information before the appointment and by discussing what type of proposal the company may realistically be able to put forward to creditors.
If you’ve got a client that you think is a strong candidate for a Small Business Restructure, reach out to us for a confidential discussion.