Small businesses restructuring: Trends and considerations

On 27 June 2025, the Australian Securities and Investments Commission (ASIC) released its review of the small business restructuring (SBR) process from 2022 to 2024. The review covered 3,388 SBRs undertaken between 1 July 2022 and 31 December 2024.

A refresher on the small business restructuring process

The SBR process was introduced in haste in early 2021 to “support increased productivity and innovation by reducing the complexity and costs involved in insolvency processes…and ultimately helping small businesses to survive” (Corporations Amendment (Corporate Insolvency Reforms) Bill 2020).

However, the initial uptake was incredibly slow, with only 82 SBRs undertaken in the first 18 months.

We put this down to uncertainty in relation to the process on all fronts. Registered liquidators had to train and upskill their teams to deal with this new type of insolvency appointment, small business advisers were either not aware of the process or were unsure how it would work in practice, and directors were nervous about the impact it would have on their businesses.

SBRs are available to companies that meet the eligibility criteria, such as debts totalling less than $1 million. For more information on the eligibility criteria for the small business restructuring scheme, read our article, ‘Small business restructuring: An attractive option for directors who want to maintain control’.

The use of small business restructuring has skyrocketed

Fast forward three years and SBRs now account for approximately 20 per cent of total insolvency appointments, with more than 200 SBRs being entered into each and every month.

What is driving the increased use?

• Market awareness
• The willingness of the Australian Taxation Office (ATO) to accept reasonable proposals
• Directors see the process as a relatively inexpensive way to resolve legacy debt.

Small business restructuring appointment outcomes

In the period reviewed by ASIC, 87 per cent of restructuring plans were approved. However, this number has started to decline in recent months.

Of the finalised restructuring plans, 87 per cent of total funds were distributed to the ATO. While it’s no surprise the ATO is a major creditor in the majority of SBRs, this statistic highlights just how crucial the ATO’s vote is.

For an SBR proposal to be accepted, more than 50 per cent in value of creditors who vote must accept the proposal. You could therefore draw the inference that the ATO controls the vote in the vast majority of SBRs.

The average return to unsecured creditors under completed SBR proposals in the review period was 21 cents in the dollar.

How much does the process cost?

SBR remuneration is split into two buckets:

1. The proposal period: Where the plan is formulated and put to creditors to vote. The median remuneration for this period was approximately $16,000. This amount is approved by the directors of the company prior to appointment and paid in advance
2. The plan period: Typically consists of the restructuring practitioner collecting the contributions and distributing to creditors. Remuneration is paid as a percentage of the total pot of money. The median remuneration for this phase was approximately $7,000. However, the percentage sought by a restructuring practitioner will vary depending on a number of factors, including the length of the plan, the number of creditors and the number of instalments.

Set out below is a worked example of a company entering SBR with $300,000 of outstanding creditors. The total cash requirement may look like the following:

Item	Amount ($ excl. GST)
Initial remuneration	16,000
Contribution to creditors (21 cents in the dollar)	63,000
SBR plan remuneration	7,000
Total	86,000

 

This equates to approximately 29 per cent of the company’s total debts. Once the plan is finalised, the debts are effectively wiped, and the balance sheet is cleansed.

Funding options

While the above scenario reflects a significant compromise, we understand that fronting that sum of money can be daunting. However, there are options available for directors to consider, including:

1. Borrow the funds: There are a number of lenders that will fund SBR contributions. These lenders will typically seek some form of real property security (a caveat or second mortgage). The loan can then be paid off over an extended period of time
2. Redraw on personal home loan: If the Director owns or has access to a property with equity, redrawing or refinancing to access the equity may also be an option
3. Fund from future trading cash flow: If the business is forecast to trade profitably post-SBR, the contributions could be funded from future cash flow over an extended period. An SBR can run for three years so the proposal may be structured as monthly or quarterly instalments. However, there is a risk that the proposal will not be palatable to creditors if the SBR runs for an extended period of time.

General creditor feedback and considerations

To maximise the prospects of your SBR proposal being accepted, we suggest you ensure the following:

• All ATO lodgements (income tax, pay as you go (PAYG), business activity statements (BAS) and fringe benefits tax (FBT)) are up to date - The ATO considers the company’s tax lodgement history when determining whether to support a proposal. Chronic late lodgers are unlikely to receive support from the ATO
• There are no director loan accounts - The ATO takes a dim view of directors who have extracted cash from the business via a loan, in circumstances where tax obligations have not been met. If any loans exist, these should be repaid prior to commencing an SBR
• The proposed return to creditors is reasonable - While the average return to creditors from completed SBRs in the review period was 21 cents to the dollar, ASIC has reported an increase in the number of SBRs being rejected. Accordingly, it may be that the return to creditors will need to be above average, particularly in circumstances where the return is over an extended period of time
• The performance of the business is capable of being turned around - There is little benefit in going through an SBR process if the business continues to be loss making. Directors need to ensure that the business can trade profitably post-completion of the SBR.

How BDO can help

At BDO we support companies through the full cycle of a business. Our business restructuring team specialise in helping business owners with all issues faced by distressed and underperforming businesses.

We have a team of professionals who are highly experienced in handling small business restructuring and all other restructuring options. Learn more about the options available to businesses under debt stress by contacting your local BDO team.