When a good business has too much debt: What restructuring can do

The debt is real but the business still works

You have projects running, clients who pay and margins that would support the team if the debt was not there. The problem is not the work. The problem is what you already owe. Walking away destroys what works. Ignoring the debt does not make it manageable.

A small business restructure allows an eligible company to restructure their debts by proposing and agreeing to a restructuring plan with their creditors, while the directors stay in control of the business. Voluntary administration can lead to a deed of company arrangement, a binding agreement that aims to get a better return for creditors. The point is to stabilise what is viable, not to postpone an inevitable failure.

List every debt by type, amount and security

Start with one document. Record each creditor, the amount owed, the type of debt (trade, tax, loan, superannuation), whether it is secured and when it fell due. Separate director loans, related party claims and third party creditors. Mark any debt under dispute or covered by a director penalty notice.

The list shows the shape and size of the problem. Total liabilities of the company must not exceed one million dollars to be eligible for small business restructuring. Know where you stand before assuming any restructure option is open. Bring the completed list to your accountant and ask them to confirm the figures and classifications before relying on them.

Source: Official guidance

Build a 13-week cash forecast with realistic assumptions

Take the next thirteen weeks. Write down receipts expected from completed and current work, with dates. Write down wages, materials, subcontractors, rent, insurance and loan repayments that must be met. Mark which payments can be delayed without breaching a contract or triggering default, and which cannot.

Supporting information for restructuring plans includes cashflow forecasts including key assumptions and documented changes to management and operations teams aimed at improving financial performance. The forecast identifies the weeks where cash runs short and tests whether the business can trade through the restructure period. A forecast built on hope rather than evidence will not satisfy creditors or a restructuring practitioner.

Understand the available restructure paths

The small business restructuring regime provides a streamlined process for directors of struggling small companies to restructure their debts, while remaining in control of the company. Nearly half of approved deeds of company arrangement involved the company's business continuing to trade after the deed was executed. Small business restructuring suits companies under one million dollars in liabilities; voluntary administration and a deed of company arrangement may suit more complex or larger debts.

The ATO voted on 2,668 restructuring plans during the 2024–25 financial year, supporting 2,103 plans, an overall support rate of around 80 per cent. The ATO generally supports a restructuring plan where the plan would result in a higher payment to creditors within a reasonable period than would be received if winding up. Each option has eligibility rules, costs and timing. Get advice from a registered liquidator or restructuring practitioner on which path fits your circumstances.

Talk to lenders and the ATO before they escalate

Early action can prevent escalation and open up viable options like small business restructuring. If the ATO is a major creditor, contact them early. Where the ATO is a major creditor, they are open to reviewing draft restructuring plans and providing feedback. You must provide the draft restructuring plan with all supporting information as soon as possible, no later than five full business days before the day the plan is required to be issued to the creditors. Explain what the business does, why it remains viable and what steps you are taking. Silence does not buy time.

Today, complete the debt list, start the 13-week forecast and contact a registered liquidator to discuss whether a formal restructure is realistic for your position. Bring the debt list, recent financial statements and the cashflow work in progress. If the business is viable but the debt is beyond what informal arrangements can fix, contact CRP about coordinating restructure advice and support with the relevant qualified professionals. The aim is a stable business, not a deferred collapse.