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.

What is the SBR regime?

Introduced in Jan 2020, the 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 means you can:

  • Remain in control of the business and continue to be the decision maker
  • Continue trading
  • 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!

To qualify for the SBR regime you 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

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 on the business, property and general financial circumstance

  1. Acceptance period

Creditors (the people to whom you owe money) have 15 business days to cast their vote for or against the proposal. If the majority (in debt value, not number) agree to your plan, then it goes ahead. The ATO have so far accepted 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.

  1. 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.

What do you need to do?

  1. Talk to us 
  2. If we agree you’re in a bit of strife and this is a good option for you, we’ll put you in touch with a restructuring practitioner
  3. Engage the restructuring practitioner! This is who will guide you through and manage the entire process 

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.