Before you start a small business restructure, check the entry rules
Start with the gate, not the plan
Small business restructuring can look like a lifeline when cash is tight, but the process starts with a gate, not a proposal. If the company cannot meet the entry rules, time spent drafting a plan can go nowhere while wages, suppliers and tax pressure keep building. A quick check gives you a clearer decision point. ([business.gov.au](https://business.gov.au/exiting/bankruptcy-and-insolvency/insolvency-for-companies?utm_source=openai))
The law lets a company appoint a small business restructuring practitioner in writing, and the company must satisfy the eligibility test when restructuring begins. Business.gov.au summarises the cap at $1 million in total debt, so the first question is simple: does the balance sheet and your current creditor list fit inside that ceiling? ([legislation.gov.au](https://www.legislation.gov.au/C2020A00130/asmade/2020-12-15/text/original/epub/OEBPS/document_1/document_1.html?utm_source=openai))
Count the liabilities properly
Start by totalling liabilities line by line, not by guess. Include trade creditors, finance, ATO debt, lease balances and any other admissible debts and claims that may count on the day the restructure starts. The regulation sets the test by reference to total liabilities to pay admissible debts and claims, and the total must not exceed $1 million. ([legislation.gov.au](https://www.legislation.gov.au/F2001B00274/2025-07-01/2025-07-01/text/original/epub/OEBPS/document_1/document_1.html?utm_source=openai))
If the number is close, do a second pass with your accountant and keep notes on what is disputed, contingent or already paid. That matters because eligibility is tested at the start of the restructuring, not after the proposal is drafted. A clean list also helps you avoid underestimating the size of the problem. ([legislation.gov.au](https://www.legislation.gov.au/F2001B00274/2025-07-01/2025-07-01/text/original/epub/OEBPS/document_1/document_1.html?utm_source=openai))
Source: Official guidance
Clear staff and tax gaps first
Next, clear the people and tax side of the file. The regulations require the company to have paid the employee entitlements that are payable, and business.gov.au says staff entitlements must be paid before small business restructuring can proceed. That includes the obvious payroll items and can also include superannuation contributions payable by the company. ([legislation.gov.au](https://www.legislation.gov.au/F2001B00274/2024-11-22/2024-11-22/text/original/epub/OEBPS/document_1/document_1.html?utm_source=openai))
Tax lodgements matter just as much. The same regulation requires the company to have given the tax documents required by taxation laws, or to be substantially complying with that obligation. In plain terms, an outstanding BAS, income tax return or other overdue lodgement can block the process until it is fixed. Do not leave that check to memory. ([legislation.gov.au](https://www.legislation.gov.au/F2001B00274/2024-11-22/2024-11-22/text/original/epub/OEBPS/document_1/document_1.html?utm_source=openai))
Get a practitioner to test the file
Once the file is tidy, ask a restructuring practitioner to test it before you go further. The legislation contemplates a company appointing a practitioner to help develop the restructure plan, and that review is the right time to test eligibility, confirm the liability total and check whether the records support the proposal. ([legislation.gov.au](https://www.legislation.gov.au/C2020A00130/asmade/2020-12-15/text/original/epub/OEBPS/document_1/document_1.html?utm_source=openai))
That review is useful because it can expose problems early, when you still have room to fix them. If liabilities are over the cap, or a lodgement or entitlement is missing, you can decide whether to correct the issue, pause the restructure, or consider a different path. Cheaper mistakes usually happen before papers are lodged. ([business.gov.au](https://business.gov.au/exiting/bankruptcy-and-insolvency/insolvency-for-companies?utm_source=openai))
Do these four steps today
Today, do four things in order: total the liabilities, pay any outstanding staff entitlements, lodge every overdue tax return or statement, and book an eligibility check with a restructuring practitioner. Bring the balance sheet, payroll records and tax account so the review is based on facts rather than hope. That is the fastest way to know where you stand. ([legislation.gov.au](https://www.legislation.gov.au/F2001B00274/2025-07-01/2025-07-01/text/original/epub/OEBPS/document_1/document_1.html?utm_source=openai))
If you want help turning those records into a practical debt restructuring conversation, call CRP today. CRP can coordinate the next step with an independent qualified professional, and this article is general information only and not legal advice. Eligibility still depends on the company’s actual records and current position. ([business.gov.au](https://business.gov.au/exiting/bankruptcy-and-insolvency/insolvency-for-companies?utm_source=openai))