Small Business Restructuring Gains Popularity in Australia

The rise of Small Business Restructuring (SBR) is providing an alternative to liquidation, aiming to help struggling businesses recover while managing creditor relationships. However, it carries challenges as the Australian Taxation Office (ATO) intensifies efforts to reclaim outstanding debts.

SBR legislation, introduced in early 2021, has quickly become a preferred option for many small business owners navigating financial difficulties. Since its introduction, over 2,430 companies have used the restructuring pathway in 2024 alone—an increase of nearly 210% compared to the previous year. Experts predict these numbers could climb to 3,000 by the end of the financial year as ATO debt recovery efforts expand.

Through the SBR process, eligible businesses benefit from retaining control while working alongside practitioners to develop repayment plans. Statistics show creditors recover more, with average returns of over 20 cents per dollar—compared to lesser or no recovery under voluntary liquidation scenarios. The SBR framework also ensures fixed fees and reduced publicity versus traditional administration methods, making it a cost-effective and strategic option.

Yet, SBR outcomes are not guaranteed. Businesses must meet strict eligibility criteria, including debt limits and compliance standards. Concerns about sustainability and unresolved tax issues can lead to rejected applications. The growing volume of ATO debt—from $16.5 billion pre-pandemic to $35.2 billion in 2024—reflects how challenging the economic climate remains for many small businesses.

Source: The Australian