We have posted many times previously about Small Business Restructures (SBR’s) and their use to manage out of control debt to restructure Small Businesses in the post-Covid 19 era.

A recent article from the ABC highlights the opportunity and is worth a read.

Find it here:

https://www.abc.net.au/news/2025-07-11/restructure-hospitality-debt-ato-pub-bakery-asic/105495132?utm_source=abc_news_app&utm_medium=content_shared&utm_campaign=abc_news_app&utm_content=other

The highlights, you ask?

• “The number of SBRs soared exponentially in the last financial year, with around 3,000 put forward to creditors.”
• Hospitality in the main industry sector feeling the pinch in tough trading conditions right now and are the biggest group taking advantage of the SBR process to restructure – representing about 22% of the total number  (construction comes in second place).
• “Most SBRs are involving between $200,000 to $400,000 in debt, with most plans asking creditors to wipe around 80 per cent of that ledger.”
• The ATO is a party to 93% of the SBR’s to date, and is voting in favour of restructuring plans in approximately 80% of those occasions.
• "An SBR is not a shortcut to avoid paying tax debts, it is a formal restructuring mechanism available for insolvent or likely to be insolvent businesses."

So, in summary, the SBR continues to be a very helpful tool in the arsenal to restructure a business which has gotten off the rails. We can assist to ensure a prospect meets the SBR rules, and provide guidance on what type of plan, and quantum required, may be likely to succeed. You only get one shot at an SBR (a Director can only use it once within a 7 year period), so it is important to get it right first time.

We do note however, it is not all good news and positivity in the world of SBR’s...

There is no question the ATO, who as noted above is a creditor in the vast bulk of proposals, and often the largest creditor, is increasingly pushing back and refusing deals put to them, which they may have previously accepted. It is reported that the rejection rate across all SBRs put forward has almost doubled in the last 12 months.

The most common reasons for ATO rejection of plans appears to be:

• Poor compliance history of the company (late or no lodgements, failed repayment plans)
• Existence of loans to Directors (including Div 7A loans), particularly where those loans have increased at the same time that the ATO debt has accrued;
• Non-commerciality of return, particularly when compared to a theoretical liquidation return. Where as offering a 20 cent return was previously common, the required rates of return appear to now be increasing;
• Lack of certainty around repayments under the plan, particularly where those payments are to be made under long-term instalments.

Contact us if you would like to discuss SBR's in general or any aspect of this Blog!

Cheers,
Bill

Robson Cotter specialise in both personal and corporate financial distress and insolvency and are well placed to assist anyone with any queries in this area. Contact us today for a no cost and no obligation chat!