Small Business Restructure: The Accountant’s Role

A small business restructure lets an eligible company propose a binding debt repayment plan while directors retain trading control. Your role is to reconcile debts, identify urgent risks and give a registered restructuring practitioner the records needed to assess the company and its proposal.

How Small Business Debt Restructuring Works

Small business restructuring (SBR) is a formal company insolvency procedure under Part 5.3B of the Corporations Act. Eligible companies can use it to address debts including ATO liabilities. Sole traders and partnerships cannot use this company procedure.

Directors remain responsible for the company’s day-to-day affairs. The restructuring practitioner advises on the proposal and makes the required declaration to creditors. Only an ASIC-registered liquidator with an appropriate registration can accept that appointment. Being the company’s accountant or bookkeeper does not qualify you for that appointment.

The ASIC restructuring guide explains the appointment and creditor stages. Keep these stages separate in your file:

1. Directors resolve that the company is insolvent or likely to become insolvent and appoint the practitioner in writing. A referral alone starts no statutory protection.
2. Directors prepare the plan and proposal statement with the practitioner. The usual proposal period is 20 business days from appointment, with extensions available under the rules.
3. The practitioner sends the proposal and declaration to affected creditors. The usual acceptance period is 15 business days, although disputes can extend it.
4. If accepted, the plan governs affected debts while the company continues trading. The plan practitioner administers creditor distributions. Company payments for admissible claims cannot extend beyond three years from when the plan is made.
5. Successful completion releases the company from admissible debts and claims. Rejection ends restructuring, while plan failure can make unresolved claims payable again.

During restructuring, transactions outside ordinary business require the practitioner’s consent. Paying an old admissible debt, transferring the business or paying a dividend falls outside ordinary business. Obtain advice before making those payments or commitments.

The plan generally deals with admissible debts existing when restructuring begins. Employee entitlements and new trading debts sit outside that compromise. Secured creditors retain rights subject to statutory exceptions and consent. Identify each secured balance and its security separately before estimating what creditors could receive.

Identify Eligibility and Urgent Warning Signs

Assess small business restructure eligibility at the proposed appointment, then identify what the company must complete before proposing its plan. A low ATO balance alone does not establish eligibility.

Under the Corporations Regulations, liabilities for admissible debts and claims must not exceed $1 million when restructuring begins. Employee entitlements are excluded from that definition. Give the practitioner the full liability schedule so they can classify debts and assess the statutory limit.

Obtain the company’s previous restructuring and simplified-liquidation history for the preceding seven years. Obtain the same history for other companies involving current directors and anyone who was a director during the preceding 12 months. Prior use can prevent appointment. A narrow related-company exception needs the practitioner’s assessment.

Ask about any existing external administration or continuing restructuring plan. The Corporations Act’s appointment rules also exclude an APRA-regulated body and its related bodies corporate. Refer these facts before treating the company as eligible.

Before a plan goes to creditors, payable employee entitlements must be paid and required tax documents lodged, or the company must be substantially complying. Accrued leave that is not payable has different timing. Give the practitioner payroll and superannuation records, including any superannuation guarantee charge, to assess the requirement. An unpaid tax debt can remain even when lodgements are complete.

Incorrect: Treating lodged activity statements as proof that superannuation is paid.

Correct: Reconciling lodgements separately from evidence that payable employee entitlements have been paid.

Seek prompt insolvency and legal advice when the company cannot pay debts as they fall due. Repeated broken arrangements, unpaid wages, tax arrears and exhausted credit are warning signs. Escalate a statutory demand, winding-up application, garnishee or director penalty notice immediately. Record the notice and response deadline without waiting for a complete referral pack.

ASIC’s insolvency guidance for directors explains directors’ duties when financial trouble emerges. Continuing ordinary payment negotiations does not establish that further trading is lawful.

Reconcile ATO Debts and Client Authorities

Reconcile each ATO account to the company’s accounting records and obligations before presenting a tax-debt total. Separate amounts already assessed from obligations still awaiting lodgement or assessment.

1. Obtain account transaction histories and balances, together with the lodgement list and copies of collection notices.
2. Match assessments and payments to the relevant obligation. Separate tax principal from interest, penalties and unmatched credits.
3. Estimate unlodged obligations from the underlying records. Label each estimate and assign the lodgement to the registered practitioner responsible for that service.
4. Compare payment-arrangement instalments with actual payments and bank transactions. Explain differences between the ATO balance and the company’s accounts.
5. Give the restructuring practitioner both the reconciled balance and every unresolved difference. Refresh the schedule for the proposed appointment rather than carrying forward an old statement total.

Keep company tax debts separate from each director’s personal exposure. A company plan does not automatically cancel director penalties or personal guarantees. The ATO’s director-penalty enforcement guidance describes separate director obligations. Refer a director penalty notice for urgent advice on the actual amounts and available responses. Appointment cannot remit every director penalty.

For a guarantee, obtain the signed document and identify the guarantor and creditor. Temporary restrictions during restructuring do not amount to a permanent release. The practitioner and legal adviser need to assess what happens when restructuring ends or a plan starts.

Record the company’s authority to release information, the intended recipient and the entities covered. Share through an agreed secure channel. Existing tax-agent access does not establish that the practitioner has their own ATO access. The ATO’s insolvency contact instructions require representative nomination and identity checks before acting for a client.

Agree who maintains the books and who prepares each tax lodgement. Directors supply complete records and make company decisions. The appointed practitioner handles the statutory proposal and creditor dealings. Keep the accountant’s and bookkeeper’s work within their agreed services and registration.

Prepare the Practitioner’s Handoff Pack

Prepare one indexed pack that connects each balance and forecast assumption to its evidence. Include a gap register so missing information has an owner before the practitioner begins assessing the proposal.

Include the following records:

• A creditor schedule with balances, debt origins, related parties, disputes and security details.
• Current management accounts, historical financial statements and reconciled bank accounts, with receivable and payable ageing.
• A cash-flow forecast with receipts evidence, current trading costs, tax payments and proposed plan contributions.
• Payroll and employee-entitlement reconciliations, superannuation payment evidence and any charge statements.
• Tax-account histories, assessments, lodgement status, payment arrangements and collection notices.
• An asset register, ownership evidence, finance agreements, guarantees and security registrations.
• Company and ownership records, director history, related-entity loans and the directors’ explanation of financial distress.
• Client authorities, agreed access arrangements and the practice’s responsibility record.

Fictional Handoff Register

This invented company example shows how to separate an established balance from a disputed claim or an incomplete record. The amounts are debts, not proposed settlement amounts.

Item	Status and evidence	Owner	Next action
ATO account: $180,000	Verified to account transactions and reconciled books	Tax agent	Add estimated unlodged obligations separately
Supplier claim: $24,000	Disputed because a $4,000 credit note is missing	Bookkeeper	Obtain the credit note and retain both versions
Employee entitlements	Incomplete because superannuation payment evidence is missing	Director	Supply fund receipts and payroll records
Director loan: $40,000	Verified to transactions and signed accounts	Accountant	Mark as related-party debt for practitioner review
Asset finance	Incomplete because the security agreement is missing	Director	Obtain the agreement and current lender statement

Do not silently deduct the disputed $4,000 or assume missing superannuation evidence means a nil liability. Send the discrepancy to the practitioner with the documents. The practitioner applies the creditor-dispute procedure and determines the proposal’s treatment.

A small business restructure assessment can help organise preliminary flags. Keep its result beside the supporting records and the questions requiring the appointed practitioner’s judgement.

Assess the Proposed Plan’s Cash Flow

Test whether the company can fund the proposed plan while paying the costs of continued trading. A forecast that pays old debt by accumulating new tax arrears does not support the proposed recovery.

Start with reconciled opening cash and realistic collection timing. Include wages, suppliers, rent, current tax and superannuation. Add plan contributions and practitioner costs on their actual payment terms. Identify any third-party contribution and evidence that the contributor can provide it.

Fictional Monthly Funding Test

Assume an invented company forecasts $70,000 in monthly cash receipts. Operating payments are $48,000 and current tax and superannuation payments are $10,000. That leaves $12,000 before plan funding. A proposed $8,000 monthly contribution leaves $4,000.

If receipts fall by 10%, they become $63,000. With the same $58,000 outgoings and $8,000 contribution, monthly cash falls by $3,000. The base forecast therefore needs a supported response to weaker trading. Show available reserves, a confirmed contribution or revised terms before presenting the funding as achievable.

These invented figures assume the $48,000 includes recurring advisory costs. Any appointment costs payable separately must also be funded. The assumed contribution depends on an accepted plan and its actual terms. Creditors decide whether to accept the proposed return.

Use a business viability assessment for an initial view of trading figures. Give the practitioner the underlying forecast and assumptions so they can assess the proposed funding.

Creditors assess their likely return and the evidence that contributions will arrive. Explain the cause of distress and what changes the trading result. Provide information about asset values, related-party transactions and the likely liquidation outcome.

The NSW Small Business Commissioner’s guidance identifies ATO concerns including unpaid related-party loans and poor tax-payment or lodgement history. A better proposed return does not guarantee ATO support.

A majority in value of affected creditors who return voting statements must support the proposal. Related creditors are excluded from that vote, although their admissible claims can receive distributions. Record related-party balances instead of removing them to improve the apparent result.

If creditors reject the proposal, restructuring ends and its protections cease. Directors need immediate advice about the next lawful option. A later plan failure can revive unresolved admissible claims. Escalate a missed contribution to the plan practitioner immediately.

Compare Restructuring With Other Options

Compare each option against the company’s ability to trade and its full creditor position. An arrangement with one creditor cannot resolve every creditor’s claim.

Option	Purpose	Who controls the business?	Creditor outcome
SBR plan	Agree a formal compromise for eligible company debts	Directors retain trading control under statutory restrictions	An accepted plan binds affected claims under its terms and the law
Liquidation	Wind up the insolvent company and distribute available assets	Liquidator takes control	Creditors claim in the winding-up and receive available distributions
Ordinary ATO payment arrangement	Pay the tax debt over an agreed period	Directors retain control	Tax debt is paid under the arrangement, without a general creditor compromise

An ATO payment plan can suit a company that can meet its obligations with more time. It is not a general moratorium or a release of director penalties. Where the company cannot meet debts as they fall due, assess insolvency options promptly.

The small business restructure rollover addresses qualifying asset transfers between entities for tax purposes. It does not compromise company debts. Debt-consolidation lending adds a financing obligation and needs a separate repayment assessment.

Moving assets away from creditors is not a substitute for a lawful restructuring. Preserve transaction records and refer proposed transfers to the practitioner and legal adviser before anyone acts.

Support the Client After Referral

Confirm that the practitioner has accepted the referral and received usable records. An email with attachments does not establish an appointment, completed proposal or accepted plan.

Agree the next records delivery and who receives creditor enquiries. Keep the responsibility record current as the company moves from assessment to appointment and then into a plan. Continue bookkeeping and agreed tax lodgements so new liabilities remain visible.

Compare actual receipts and payments with the forecast at each agreed reporting interval. Reconcile plan contributions to bank payments and the practitioner’s records. Report a cash shortfall before the next commitment falls due, together with the reason and available funds.

When the practitioner confirms completion, retain the completion record and reconcile the final debt treatment. If the proposal is rejected or a plan fails, obtain the practitioner’s written position and update the company’s obligations immediately. Close the referral task only when the next action has an agreed owner and deadline.