Simplified debt restructuring | NSW Small Business Commissioner

26 November, 2025

Running a company can be challenging, especially when cash flow pressures build. If you find yourself in financial difficulty, there are alternative pathways for small businesses other than traditional liquidation and administration.

Must be a corporation to qualify

In 2021, new laws were introduced to make corporate insolvency simpler and more affordable for small, incorporated companies. The changes introduced are the Simplified Restructuring Process, and the Simplified Liquidation Process.

Unincorporated businesses, such as sole traders and partnerships, fall under personal bankruptcy laws, which provide separate options and obligations under the Bankruptcy Act 1966 (Cth).

Simplified Restructuring Process

The Simplified Restructuring Process (SRP) allows eligible small businesses (with liabilities under $1 million, excluding employee entitlements) to restructure debts while continuing to trade. It’s faster, cheaper and keeps control in the hands of business owners.

Staying in control during the process

Under the process, business owners remain in control of operations while a registered Small Business Restructuring Practitioner helps prepare a formal plan and proposal statement outlining how unsecured creditors will be repaid.

The plan must be approved by more than 50 percent of creditors by value for it to take effect. A moratorium (suspension) prevents unsecured creditors from initiating or continuing recovery actions during the process. This option can help viable businesses recover from temporary financial challenges.

ATO - key creditor

Previous ASIC reports highlight that the ATO is a dominant creditor in the restructuring process. Meaning for most companies using the simplified restructuring process, the ATO is often the majority value creditor, and its vote on a restructuring plan is decisive. Below are some of the key considerations the ATO will take into account when considering whether to accept a restructuring plan:

Non repayment of director or related entity loan accounts
Frequent late or missing lodgements
Non-payment of tax liabilities
Whether the plan would provide an unfair advantage over other businesses.

Further information

Simplified Liquidation Process

The Simplified Liquidation Process (SLP) provides a quicker and more affordable way for small companies to close when they can no longer continue trading. It’s designed for incorporated businesses with liabilities under $1 million that have entered a creditors’ voluntary winding up on or after 1 January 2021. To be eligible,

The company must have met all its tax lodgment obligations,
the directors must, within five business days after the meeting at which the voluntary winding up resolution was passed, give the liquidator a report on the company’s business affairs and a declaration that they believe on reasonable grounds the company meets the eligibility criteria for the simplified liquidation process. ,
no director can have used the simplified process for another company in the previous seven years.
and the company cannot have undergone restructuring or been the subject of a simplified liquidation process in the preceding seven years

Unlike standard liquidation, the SLP cuts out many time-consuming steps, such as formal creditor meetings. Instead, the liquidator manages decisions through a proposal-without-a-meeting process and provides a report to creditors within three months of their appointment. If a dividend is payable, it’s issued as a single payment at the end of the process. The SLP keeps creditor protections in place while reducing the complexity, cost and time involved in winding up a small company.

Further information

Seek professional advice

It is important for small business owners to be aware of all their options when facing financial hardship. Small business owners should always seek professional advice when weighing up their options.