The Small Business Restructure Regime
Sounds like a boring title but we promise you, this is worth a read if you find yourself in significant tax (or other creditors like suppliers) debt. Bringing you some news from the ATO/government/treasury/whoever else decides these things that may be the difference between liquidation and keeping your head above water. Huge, relieving changes for those finding themselves in a bit of post-covid (or are we still saying mid?) strife.
Key highlights:
- Debt Relief While Staying in Control: The Small Business Restructure (SBR) Regime allows small business owners to restructure and manage debts while continuing to operate their business, offering an alternative to liquidation.
- Cost-Effective and Streamlined Compliance: The SBR regime simplifies reporting, reduces administrative burdens, and lowers compliance costs through automation, making it a more efficient choice compared to traditional methods.
- Three-Step Restructuring Process: The SBR process includes submitting a proposal, a 15-day creditor approval period, and the rollout of the debt repayment plan, overseen by a restructuring practitioner to ensure compliance and successful implementation.
What is the SBR regime?
Introduced in Jan 2020, the SBR regime was designed to give business owners a way to restructure debts whilst remaining in control of the business (rather than having to liquidate). The reforms came into action last year – well timed with the amount of small businesses struggling to meet various payments on the back of covid. Industries like hospitality and gyms were particularly hard hit, or those that were impacted on rising costs of materials and other companies not paying their bills. The onflow effect was enormous.
The SBR regime allows small businesses to:
- Remain in control of the business and continue to be the decision maker
- Continue trading while addressing their debts
- Pay your debt off over a period of time
- Continue paying employees
It’s also a much cheaper way to sort out your debt than was previously available. Winner winner!
How is a company eligible for the SBR?
To qualify for the SBR regime, small business owners must:
- Have liabilities that totals less than $1 million (excluding employee entitlements)
- Have not been through the debt restructuring process before
- Must have all employee entitlements paid, including super
- Lodged all returns with the ATO
By adhering to these SBR requirements, small businesses can benefit from a streamlined business reporting framework that simplifies tax reporting and automates compliance processes. This SBR system not only enhances data accuracy but also reduces the administrative burden on small business owners. Furthermore, compliance with the SBR framework is mandatory for those looking to improve their operational efficiency and navigate government regulations effectively.
For financial institutions and accountants, interacting with the SBR regime offers an efficient way to ensure that financial data submission aligns with standardised business reporting formats. With an increased focus on compliance automation, small businesses can effectively manage their business data and fulfil their reporting obligations.
Benefits of the SBR Regime for Small Businesses
The SBR regime is recognized for being more cost-effective than traditional reporting methods for small businesses. Unlike conventional reporting systems, which often involve cumbersome processes and high administrative costs, the SBR system automates compliance and simplifies tax reporting. This automation significantly reduces the time and resources required for financial data submission.
Additionally, the SBR framework eliminates the need for multiple submissions to different agencies, which can be costly and time-consuming. By adhering to standardised formats, small businesses can minimise errors, leading to fewer penalties and reduced compliance costs. Overall, the SBR regime not only streamlines operations but also enhances financial efficiency, making it a superior choice for small businesses compared to traditional reporting methods.
In the following comparison table, we will delve deeper into how the SBR regime stacks up against traditional reporting, highlighting its benefits in cost and efficiency.
Factor | SBR | Traditional Methods |
Initial Setup Costs | Potential for higher upfront costs for software and training | Lower upfront costs |
Ongoing Costs | Lower ongoing costs due to automation | Higher ongoing costs due to manual data entry and processing |
Time Savings | Significant time savings due to automation | More time-consuming processes |
Error Reduction | Reduced errors due to automation | Higher risk of errors due to manual processes |
Data Quality | Improved data quality due to standardisation | Potential for inconsistencies in data quality |
Compliance Risks | Reduced compliance risks due to automation | Increased risk of non-compliance due to manual processes |
Data Insights | Improved data insights for decision-making | Limited data insights |
There are three stages to the SBR process
1. Proposal Period
In order to apply for a restructure, you’ll need to submit a plan, a proposal statement (which includes a list of your debt and to whom it’s owed) and voting forms. A restructuring practitioner (an insolvency specialist with a special licence who we can refer you to) is required to collate information about your financial data and overall business circumstances, ensuring compliance with SBR requirements. This process simplifies tax reporting and reduces the administrative burden for small business owners.
2. Acceptance Period
Creditors (the people to whom you owe money) have 15 business days to cast their vote for or against the proposal. For the plan to be approved under the SBR system, the majority (in debt value, not number) must agree to your plan, then it goes ahead. This SBR regime enhances data accuracy and has a strong approval rate, as evidenced by the ATO accepting 50 out of 55 proposals – so the strike rate is pretty good!
So to make this part crystal clear – if your only significant debt is to the ATO, then they are the sole creditor in the plan and the only party who will need to agree to it.
3. Plan Rollout
Once the proposal has been accepted, the plan is then put into place. The restructuring practitioner is responsible for ensuring debt payments are made according to the agreed plan and that everything is being lawfully adhered to. This not only streamlines business reporting but also ensures that the restructuring adheres to regulatory compliance and government mandates. By leveraging the SBR compliance system, small businesses can enhance operational efficiency and maintain financial transparency throughout the process.
What do you need to do?
1. Talk to us
If you believe your small business is facing challenges and the SBR regime is a viable option, we can assist you in understanding how this Standard Business Reporting (SBR) system can benefit your operations. By implementing the SBR framework, small businesses can significantly enhance compliance with SBR requirements and reduce administrative burdens.
2. If we confirm that the SBR regime is suitable for your situation, we’ll put you in touch with a restructuring practitioner
This expert will guide you through the process, ensuring your small business complies with the SBR framework. They will assist with the financial data submission process and manage your tax reporting under the SBR regime, which simplifies tax obligations and automates compliance processes.
3. Engage the restructuring practitioner! This is who will guide you through and manage the entire process
By adhering to the reporting standards mandated by the SBR system, small business owners can efficiently report financial data, benefiting from increased data accuracy. This government policy covers businesses across various sectors and reinforces the importance of compliance, particularly for businesses with fewer than 100 employees. Utilising compliance software solutions can further streamline your reporting and ensure compliance with regulatory standards.
Here’s a great resource from the Treasury Department with more info on the SBR. Here’s one from ASIC that steps you through the SBR process in more detail.
If you take away one thing from this read it should be this: waiting to take action on debt is the worst thing you can do. We get it – the stress and anxiety this causes for business owners can be horrific and sometimes ignoring it for a bit longer makes you feel better in the short term.
Director Penalty Notices are something to be aware of that really hammer the above point home. In a nutshell, the ATO now has the ability to take business debt and make it the responsibility of the director/s. It’s not something you can ignore. Brookebird wrote about DPNs in detail over here (scroll down the article a bit).
Tackling debt head on and having a chat with us, and then someone who specialises in debt restructure is going to be the fastest way to alleviate that stress and to increase your chances of holding onto the business in the long term.
Don’t hesitate to get in touch.
FAQ
What trends are shaping the SBR regime?
As the business landscape evolves, several trends are shaping the SBR regime. Insights into future regulatory changes can help businesses stay ahead. SBR and regulatory standards are likely to adapt to the digital economy, necessitating ongoing vigilance from business owners.
How will the SBR regime evolve with technology?
Looking ahead, the SBR regime will continue to evolve with advancements in technology. Predictions indicate that automation will play an increasingly significant role in compliance processes. SBR compliance for small business owners will likely become more straightforward as technology advances.
What tools support the SBR compliance process?
Technology plays a critical role in the SBR regime. Compliance software solutions and advanced tax software make it easier for businesses to adhere to the regime’s requirements. Automated business reporting for small enterprises helps in reducing manual efforts and minimising human errors.
What government resources are available for SBR guidance?
Small businesses can access a wealth of resources from government agencies like the Australian Tax Office (ATO) for guidance on SBR compliance. Understanding these resources is vital for effective navigation of the SBR framework.
Are there community support systems for small businesses?
Community support systems are also invaluable. Networking and collaboration among small enterprises foster knowledge sharing and problem-solving. Engaging with local business consultants also can provide tailored advice and support.