In the high-stakes soap opera of Australian small business, there comes a moment when the dramatic music swells, the camera zooms in tight, and the protagonist, you, the business owner, must make a life-altering decision. Do you continue drowning in debt as the Australian Taxation Office looms like a shark circling in increasingly tight patterns? Or do you reach for the life raft known as Small Business Restructuring (SBR)?

The Tax Man Cometh

Let’s face it: the ATO is currently owed a staggering $35 billion from small businesses. It’s a Mount Everest of unpaid Superannuation Guarantee Charges (SGC) and BAS debt (PAYG and GST). The ATO, once content to send politely worded reminders has traded its cardigan for combat boots.

When the ATO Gets “Firmer”

“Firmer action” sounds like a mattress advertisement, but it’s actually the ATO reaching directly into your bank account via garnishee notices, hitting you with Director Penalty Notices (DPNs), and potentially telling the world about your tax debts through credit reporting bureaus. ATO are making directors personally liable for company tax debt.

Construction companies, cafes, professional services firms, retailers, and manufacturers are currently enjoying front-row seats to this financial horror show.

Small Business Restructuring: The Plot Twist Nobody Saw Coming

Enter the hero of our story: SBR was introduced at the end of COVID into legislation at Corporations Act 2001 Part 5.3B on 1 January 2021. The Government was seriously worried that there would be a tsunami of failed companies after COVID. SBR was and remains Government’s lifeline to small businesses to be able to restructure. It’s a great lifeline.

Think of SBR as the business equivalent of those home renovation shows where they don’t bulldoze the house but instead give it a dramatic makeover. You get to:

• Stay in control of your business
• Get professional help from a restructuring practitioner
• Propose a debt repayment plan to creditors
• Get protection from legal action while restructuring

The SBR Eligibility Quiz

Can your business qualify for this financial makeover? Let’s find out:

• Does your company have less than $1 million in total liabilities? ✓
• Are all your tax lodgements up to date? ✓
• Have you paid all employee entitlements? ✓

If you answered “yes” to all of the above, congratulations! You’re eligible for the SBR show.

The Four-Part SBR Mini-series

The SBR process unfolds like a perfectly paced four-part mini-series:

1. Episode 1: Pre-appointment (The Assessment) Our protagonist (you) discovers whether the business is suitable for restructuring. Think of this as the audition episode.
2. Episode 2: Proposal Phase (20 business days) You appoint a restructuring practitioner and develop your plan. This is the part where the experts come in and start drawing up blueprints.
3. Episode 3: Acceptance Phase (15 business days) Creditors vote on your plan. The dramatic voting episode where you need more than 50% of voting creditors (by value) to say “yes.” Related party creditors don’t get a vote, so you can’t stack the deck.
4. Episode 4: Plan Phase (Up to 3 years) Implementation time! Your approved plan goes into action. The satisfying conclusion where debts get paid according to the plan, and everyone hopefully lives happily ever after.

What the ATO Wants to See (Their Viewing Guide)

The ATO isn’t just any viewer—they’re the critical reviewer who can make or break your restructuring plan. They want:

• Three years of financial statements (your business biography)
• Details of current assets (what’s in your wallet right now)
• Estimated liquidation dividend (what creditors would get if you liquidated)
• Explanation of any suspicious director loan activities (did you buy a yacht while not paying taxes?)
• Future financial projections (your business crystal ball)

The Happy Outcome: SBR Success Stories

Despite the drama, over 90% of restructuring plans presented to creditors get approved. Here are the successful reboots:

• The Construction Company: Succeeded with a 20.4 cents in the dollar plan, significantly better than the 2.58 cents liquidation alternative. Regular historical tax payments and addressing related party loans helped win ATO approval.
• The Labour Hire Company: Succeeded with a 23 cents in the dollar plan paid over 24 months. Their business model makeover and commitment to future compliance convinced the ATO to say “yes.”
• The riverside café: Succeeded with 18 cents in the dollar plan over 18 months, compared to a 5 cents liquidation alternative. Owner’s personal contribution and implementation of new financial systems demonstrated commitment to future compliance and secured ATO approval. Most cafes, restaurants are carrying old ATO debt after COVID. Deal with it now!

The Director’s Cut: Your Next Steps

If you’ve watched enough episodes of “My Business Is Drowning in Debt,” perhaps it’s time to consider SBR as your season finale.

Is it worth it? When the alternative is liquidation or personal liability for company debts, many directors find that SBR is the plot twist their business story desperately needs.

Our team at Levi Consulting has guided businesses across all sectors through successful restructuring.

A confidential discussion costs you nothing but could save your business. Contact David Levi on 0418 602 466 today.

And there’s more!

We have an informative booklet with case studies for advisors to small businesses potentially needing SBR. Make the request via our Contact Us page at https://www.leviconsulting.com.au/contact-us/ or call David on 0418 406 466 and he can provide telephone triage.