The Small Business Restructuring (SBR) process has been a lifeline for many Australian companies in financial distress. But in 2025, the ATO is shifting its stance.
This blog is essential reading for directors, accountants, and legal advisors who need clarity on how the rules have changed, and how to avoid costly missteps.
For those unfamiliar, SBR is a streamlined insolvency option introduced in 2021. It allows eligible companies facing financial distress to propose a binding repayment plan to their creditors. If accepted, the company can continue trading while reducing unsecured debt, without entering full administration.
Read our original posts here for full background:
- RESOURCE PAGE:
https://obp.com.au/small-business-restructuring/ - BLOG POSTS & VIDEOS:
https://obp.com.au/2024/09/18/the-small-business-restructuring-process-update/
https://obp.com.au/2023/09/28/small-business-restructuring/
So, What’s Changing in 2025?
The ATO, previously supportive of over 90 percent of SBRs, is now tightening its approach. As Liam Bailey explains in our latest video, “The ATO is voting down proposals that don’t pass the public interest test, and directors need to take this seriously.”
Key reasons the ATO may now reject SBRs:
- Poor compliance history: If your tax lodgements aren’t up to date before proposing an SBR, the ATO is likely to vote no.
- Unfair treatment of creditors: If all other suppliers have been paid and the ATO is the only unpaid creditor, it may be viewed as an abuse of the system.
- Unaddressed director loan accounts: If directors have taken significant funds from the company, the ATO expects that money to be repaid.
- Low-ball proposals: Offers in the 20–25 cent range are no longer accepted automatically. The ATO expects the best possible outcome, or liquidation may be preferred.
As we’ve covered in our Construction Industry series, the ATO is particularly focused on this high-risk sector. For past reference, please visit our videos/blog posts on these previous topics.
- Insolvency in Building & Construction (PART 1)
- Industry Pressures & Compliance (PART 2)
- Personal Asset Protection for Directors (PART 3)
As an example where the ATA is now cracking down, some directors in construction have continued drawing unsustainable personal incomes while ignoring tax and super obligations. The ATO is no longer supporting arrangements where lifestyle comes before creditor repayment.
Advice for Directors & Advisors
If you’re considering an SBR, here’s what matters now:
- Make sure all BAS, income tax, and super lodgements are up to date.
- Avoid structuring payments to favour other creditors while leaving the ATO unpaid.
- Don’t assume the ATO will support “standard” offers. Prove yours is the best outcome available.
- Be transparent about assets, cash flow, and director contributions.
- Seek advice only from licensed restructuring professionals.
“We’re seeing some very poor advice being given in the market,” warns Liam. “Directors are being told the ATO will accept just about anything, and it’s not true. These shortcuts are dangerous.”
The SBR process remains a valuable tool for genuine financial distress. But if you’re not playing by the rules, it won’t work. If you need to know whether your business is eligible, and what the ATO is likely to accept, get in touch with our team. It can make the world of difference for your business.
We’re here to help you get the right outcome, the right way.
📞 Call: 1300 545 133
📧 Email: obp1@obp.com.au
🌐 Visit: https://obp.com.au