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Small Business Restructuing - Frequently Asked Questions!

Small Business Restructuring (SBR) – Some common Questions & Highlights on this Restructuring Tool which is successfully saving Small Businesses…

We have been recently hearing many questions in the market place about the practical operation of the Small Business Restructuring (“SBR”) regime, as it gathers momentum as a successful restructuring tool, and as pressure mounts on many small businesses across Australia.

The statistics show that more and more small businesses are making use of this new option for dealing with financial distress – and this is being hugely successful in allowing small businesses to survive and prosper, saving jobs and giving small business owners the opportunity for a fresh start – this is what SBR was designed for!

At the outset, it is important to note that the SBR process is designed for small businesses who meet the eligibility criteria, principally:

  • Debts less than $1 million.
  • Substantial compliance with tax obligations. (the ATO takes ‘substantial compliance’ to mean all tax lodgements are up to date.)
  • All employee entitlements are paid up to date.
  • No current or recent director has been involved in an SBR process in the past seven years.

Contact us to discuss and find out if you meet the qualifying criteria.

Below are some of the most frequently asked questions we are hearing in relation to SBR’s….

Question / Highlight
Will it permanently reduce your company debts?
Correct! All of your creditors will be bound by the Plan and be permanently reduced, if the Plan you propose is accepted by creditors.
SBR is not a loan or a temporary moratorium. The debts are permanently discounted and creditors will only receive the reduced amount agreed to in the Plan.
How much can be saved?
The amount able to be saved will be dependent on your unique circumstances.
The most common plans we are seeing provide for creditors to receive 20 – 30 cents in the dollar on their debts, usually over an extended period of payments by instalments.
That potentially equates to a reduction in the amount you have to pay your creditors by 70 to 80%!
Legislated by Government – a legal way to reduce tax and other debts?
Correct! The SBR regime was introduced and legislated in January 2021. It is contained within Part 5.3B of the Corporations Act, 2001.
It is all legal and has full backing of Law & Government!
Save QBCC Licensing
(applicable for Queensland based building companies)
Correct! Voluntary Administrations, Liquidations and Bankruptcy all will generally result in loss of company and Director QBCC Licences and some other accreditations.
SBR generally does not!
This makes an SBR a unique restructuring tool for QLD building & constructions businesses, which otherwise have very limited options open to them.
Can I keep trading the business during the restructure?
Correct!  One of the key elements of SBR is that control of the company remains in the hands of the Director throughout (unlike Voluntary Administration and Liquidation – where the insolvency practitioner must take over).
You can continue to trade, under your own control, during the SBR process! This reduces costs of the process substantially.
Complete a restructure and cut your debts within 7 weeks?
Correct! The SBR is designed to be a short, low cost regime for small business.
Within 7 weeks of commencement, your plan could be accepted and your debts permanently reduced by the agreed amount!
What if there are employee entitlements owing…?
Employee entitlements that are due and payable (i.e excludes accrued leave entitlements) must be paid before commencement of an SBR. This is required by Law.
We often see circumstances where there is a large amount of overdue Superannuation – NOTE there are options however – this should not be seen as an automatic exclusion from the utilising the SBR process. It is possible to cleverly use related party or third party loans, as options to address this qualifying hurdle, and ensure eligibility to access the benefits of an SBR.
Are restructuring plans are being accepted?
Correct! Following a slow start, in the first 18 months following introduction of SBR in Jan 2021, 72 business successfully used the process. In the next 12 months (the 22/23 FY), approximately 333 Plans were successfully approved!  Early stats indicated that approval rates for Plans that are proposed was a high as 90%!
The ATO is the largest creditor in the vast bulks of those cases, and they are regularly accepting Plans that provide a substantial and permanent discount on the tax payable by the small business (even in cases where the ATO has previously refused payment plans or requests for debt reduction).
These are real small businesses who have permanently cut their debt burden!
What type of business is best suited to use of an SBR…?
Any business that meets the qualifying criteria can use an SBR.
However, some of industries do seem more suited to take advantage of the process, based on some early stats from ASIC, these have most commonly included:
  • accommodation and food services (i.e cafes and hospitality) (21%),
  • construction (20%), and
  • retail (16%)
What to do next…?
Contact an expert in SBR to discuss if you meet the criteria and to see if it is a viable option to assist in your circumstances.
Robson Cotter have experience and multiple successes in the SBR process. We will work with your existing accounting advisors and help you navigate the process with the highest prospects of success.
Contact me for a no obligation, no cost discussion now, by ringing on 07 3270 8500, or submit an enquiry via our website.

All the best, Bill

Ready to Make a Change?

 07 3270 8500