Small business restructuring works best for a viable company whose debts are mostly owed to the ATO. ASIC data show most plans put to creditors are approved and completed, at a median return of 20 cents in the dollar. But the ATO now sets a higher bar, appointments fell sharply in 2025–26, and directors need a fallback.

Five years of data

The small business restructuring process began on 1 January 2021. It lets an eligible company keep trading, with directors in control, while a registered liquidator helps it propose a debt plan.

ASIC counted only 82 appointments in the first 18 months, then 448 in 2022–23 and 1,425 in 2023–24. In the year to May 2025, restructurings were 20.1% of all new insolvency appointments.

Then the trend reversed. Our analysis of ASIC data shows restructuring appointments fell 41.3% nationally in 2025–26, and 37.7% in Queensland.

When it works

ASIC’s review of 3,388 restructurings begun between July 2022 and December 2024 gives the clearest picture.

  • Most plans are approved. Creditors approved 2,820 of the 3,227 plans put to them (87%).
  • Most plans are completed. Of the plans finalised by 31 March 2025, 92% were fulfilled.
  • Returns are modest but real. The median dividend was 20 cents in the dollar.
  • Costs are low. The median total cost was $21,998.
  • Most companies are still registered. A year after completing a plan, 92% remained registered. Longer-term survival is not yet clear.

Median unsecured claims were $359,082, owed to a median of two creditors. The ATO was a creditor in at least 93% of completed plans. It received 87% of the $101 million paid to unsecured creditors.

Why the bar is now higher

The ATO is often the majority creditor and says its vote is often decisive. Where it is a major creditor, its guidance requires the draft plan at least five full business days before issue.

The draft must come with cash flow forecasts and reports on loans to directors, shareholders and related entities. The ATO commonly rejects plans for unrepaid director loan accounts, poor compliance history or unpaid tax. A plan cannot be changed once voting starts, so the first offer must be the best one.

ASIC’s figures show the shift. Creditor rejections rose from 9% of restructurings in 2022–23 to 14% in the first half of 2024–25.

When it does not work

  • Liabilities over $1 million. Employee entitlements are left out of the count, but most other debts are included.
  • Prior use. The company, or another company of a current or recent director, must not have used restructuring or simplified liquidation within seven years.
  • Arrears to employees or the ATO. Due entitlements, including super, must be paid and tax lodgements brought up to date before the plan is issued. Unpaid super is a common obstacle; see our article on Payday Super.
  • A business that cannot trade profitably. A plan deals with old debt, not the cause of the losses. If a breach is not fixed within 30 business days, the plan ends and unpaid debts fall due.
  • Secured debt and guarantees. A fully secured creditor is bound only if it consents. The stay on enforcing directors’ personal guarantees ends once the plan is made.

On director penalty notices, appointing a restructuring practitioner within 21 days of a standard notice remits the penalty. It does not remit a lockdown penalty. Plan payments reduce the director’s liability, but the director remains liable for the balance.

The alternatives

  • An informal arrangement. A short-term cash problem may be solved by a payment plan with key creditors. Safe harbour can protect directors while they pursue a credible turnaround plan.
  • Voluntary administration and a deed. This suits larger or more complex companies. A deed binds all unsecured creditors, including those who vote against it. It costs more: ASIC found a median administration cost of around $68,000. Fewer than one-third of administrations with liabilities under $1 million ended in an approved deed.
  • Simplified liquidation. If the business cannot be saved, a company with liabilities up to $1 million may use this streamlined winding up.

What directors should do now

  1. Act early, while all options remain open.
  2. Bring every activity statement, tax return and super guarantee statement up to date.
  3. Pay all employee entitlements that are due, including super.
  4. Prepare a realistic cash flow forecast.
  5. Address director and related-party loan accounts before a plan is proposed.
  6. Take advice on personal guarantees and director penalty notices before appointing.

What creditors should do now

  • Respond within the voting period, usually 15 business days. A plan passes with a majority in value of the creditors who respond.
  • Check the schedule of debts and dispute errors promptly.
  • If you hold security or a director’s guarantee, take advice on how the plan affects it.

What to watch

  • Reform. On 6 August 2026 the Government supported in principle a parliamentary committee’s call to consult on these pathways. The Productivity Commission may consider them, and the Government will consider whether targeted changes could proceed in parallel. The Commission’s interim report is due in November 2026. See Insolvency reform on hold.
  • The numbers. Watch whether restructurings recover in 2026–27, or more small companies go straight to liquidation.

To discuss how these developments affect you, contact us on +61 7 3229 9800 or send us an enquiry online.

This article is general information only and is not legal advice.

Sources: ASIC — Report 810, Review of small business restructuring process: 2022–24 (June 2025); ASIC — Report 756; ASIC Corporate Insolvency Update, Issue 36; ASIC — Insolvency statistics, Series 1; ASIC — Report 836, review of voluntary administration and deed of company arrangement outcomes (July 2026); ASIC — Small business restructuring and the restructuring plan; ATO — Small business restructuring (updated 27 March 2026); ATO — Director penalties; Corporations Act 2001 (Cth), ss 444D, 453B, 453C, 453K, 453W, 500AA; Corporations Regulations 2001 (Cth), regs 5.3B.03, 5.3B.17, 5.3B.21, 5.3B.24, 5.3B.25, 5.3B.29, 5.3B.31, 5.5.03; Treasury — Government response to the Parliamentary Joint Committee report on corporate insolvency (6 August 2026), recommendation 8; Productivity Commission — Reducing barriers to business dynamism.