Small Business Restructuring (SBR) in 2025: Key Trends and Insights for Accountants

Small Business Restructuring (SBR) in 2025: Key Trends and Insights for Accountants

Small Business Restructuring (SBR) has emerged as a pivotal tool for financially distressed companies. Recent data from the Australian Securities and Investments Commission (ASIC) and our own observations and insights highlight significant trends and considerations for accountants advising clients on SBR.

Surge in SBR Uptake

ASIC’s latest report reveals a substantial increase in SBR appointments:

• 3,388 SBR appointments commenced between July 2022 and December 2024.
• Appointments rose from 448 in 2022–23 to 1,425 in 2023–24, with projections of around 3,000 for 2024–25.
• Approximately 83% of these SBR proposals were accepted and transitioned into formal restructuring plans.

This growth indicates that SBR is becoming a preferred alternative to traditional restructuring processes, such as Voluntary Administration, offering a streamlined and cost-effective solution for small businesses.

Industry Concentration: Construction and Hospitality

The construction and accommodation/food services sectors account for nearly 50% of all SBR appointments. These industries, heavily impacted by economic fluctuations and regulatory changes, are leveraging SBR to restructure debts while maintaining operations.

ATO’s Evolving Stance

We have observed a shift in the Australian Taxation Office’s (ATO) approach to SBR proposals. The ATO is now more critical of companies that have a history of non-compliance and a lack of meaningful engagement on the issue of debt management. We have seen the ATO adopting a firmer stance on proposals that:

• Favour other creditors over the ATO, or feature the ATO as the only creditor.
• Include unresolved director loan accounts.
• Offer compromises below 20–25 cents in the dollar without compelling justification.

This change underscores the importance of preparation and planning when advising clients on SBR plans.

Financial Outcomes and Practitioner Remuneration

• Over $101 million has been distributed to unsecured creditors from fulfilled SBR plans, with the ATO receiving approximately $88 million.
• The median remuneration for restructuring practitioners remained stable at around $22,000 during the review period.

Best Practices for Accountants

To effectively guide clients through the SBR process:

1. Ensure ATO Compliance: Verify that all tax obligations, including BAS and income tax lodgements are current.
2. Director Loans: Address any outstanding director loan accounts before proposing a restructuring plan.
3. Prepare Robust Proposals: Develop comprehensive proposals that demonstrate the best possible outcome for creditors.
4. Assess Fairness: Advise clients to treat all creditors equitably to avoid perceptions of preferential treatment.

Conclusion

The evolving landscape of small business restructuring presents both opportunities and challenges. Accountants play a crucial role in steering clients through this process, ensuring compliance and strategic planning. Staying informed about regulatory changes and maintaining open communication with clients and restructuring practitioners will be key to successful outcomes in 2025 and beyond.

You can read ASIC’s report on SBRs here.