Small Business Restructuring Eligibility Checklist

Total liabilities must not exceed $1,000,000 on the day the restructuring begins (reg 5.3B.03). The test is on total liabilities, not turnover, not assets and not the amount you are behind.

What counts is any debt or claim that would be admissible to proof if the company were wound up (s 553(1)). That is wider than most directors assume. Secured debts count at the full amount owed, not just the shortfall after security. Related-party and director loans count in full. Contingent liabilities — a guarantee the company has given, for instance — count where they are admissible to proof and can be reasonably estimated. And the ATO figure is the full balance including interest and penalties, not just the overdue portion. Equipment finance and leases count too.

Add all of it before assuming you are under. Employee entitlements are the exception: wages, leave and superannuation owed to staff (s 596AA) sit outside the $1 million calculation, so unpaid superannuation will not by itself push a company over the threshold — though any amount due and payable still has to be paid in full before a plan can go to creditors. If you are over the limit, SBR is unavailable and voluntary administration becomes the comparison instead.

The employee entitlements that are due and payable must be paid in full, superannuation included (s 453C(1)(a)). This is a condition of putting a plan to creditors, not of appointing a practitioner. A company in arrears can appoint and use the 20 business days that follow to clear them — the directors need to be satisfied on day one that the company will have paid them by the time the plan is proposed.

The logic is straightforward: the process is not intended to let a company compromise what it owes its staff. In practice this most often means unpaid superannuation, which accumulates quietly and is the single most common blocker. The scope covers wages, leave and superannuation, unpaid superannuation guarantee charge included (s 596AA).

All tax returns, activity statements and other lodgements required under the taxation laws must be substantially up to date (s 453C(1)(b); reg 5.3B.04). “Substantially” allows minor administrative leeway — an overdue current-cycle return is not the same as chronic multi-year non-lodgement — but practitioners and the ATO read it strictly, so treat everything overdue as needing to be lodged.

This matters beyond eligibility, and the two obligations behave differently. Unlodged BAS or PAYG withholding turns a standard director penalty notice into a lockdown notice once it is more than three months past its due date (Division 269 of Schedule 1 to the Taxation Administration Act 1953). Lodged inside three months, the notice is a non-lockdown DPN and the 21-day window to appoint a restructuring practitioner, administrator or liquidator still remits the penalty. Unpaid superannuation guarantee charge has no grace period at all: once the due date for the SGC statement passes without lodgement, the liability is locked down from the outset. A lockdown notice removes the option of using an insolvency process to deal with the liability — SBR, voluntary administration and liquidation will all fail to remit it. Lodging late is bad. Not lodging at all is considerably worse.

Neither the company, nor anyone who acted as a director of it within the previous 12 months, can have used Small Business Restructuring or simplified liquidation in the past seven years (s 453C(1)(c); reg 5.3B.03(3)). The seven years runs from the date the earlier restructuring or simplified liquidation began, not from the date it finished.

This is a genuine one-shot consideration. It is a reason to be confident the plan is fundable before starting, rather than treating SBR as something to try.

The first four are the statutory conditions. The last three are not legal tests, but a plan that fails them will fail in practice — creditors will not accept a proposal the company cannot fund.

Failing a condition today does not always mean failing it next month, and for two of the four conditions you do not have to have fixed it before you appoint. Lodgements outstanding is often the most fixable, and getting current is usually the highest-value action available to a director in this position. Unpaid superannuation needs funding, but it is a defined amount you can work towards. Appointing while you are still working on either is possible — though the practitioner can end the restructuring if they conclude the company will not get there (s 453J), so it is a plan, not a gamble. Being over the liability limit is not fixable by effort — voluntary administration is the comparison to look at instead. The seven-year rule is not fixable at all.

Work through the checklist honestly, particularly the liability total — underestimating it is the most common error and it wastes weeks. If lodgements are the only thing standing in your way, that is good news, because it is the one condition you can act on directly starting today. If you are close to the threshold or unsure how a liability counts, that is worth a conversation rather than a guess.