Before you call an insolvency firm: SBR, administration and liquidation in plain English

Who this guide is for

You run a company. It owes the ATO — maybe other creditors too. Someone has mentioned “restructuring”, “administration” or “liquidation”, perhaps an adviser who called you, perhaps your accountant. You want to understand what each actually involves before you agree to anything.

We’re a funder, not an insolvency firm. We don’t earn anything from these processes, and we’d rather you used them only when they genuinely fit. Registered insolvency practitioners do important work, and for some companies one of these processes is exactly right. This guide is about making sure you know which situation you’re in.

The three processes at a glance

	Small business restructuring	Voluntary administration	Liquidation
Purpose	Compromise debts while the business continues	Find the best outcome — save the business or a better return than liquidation	End the company
Who’s in control	Directors, with practitioner oversight	Administrator	Liquidator
Eligibility	Liabilities not over $1m; entitlements and lodgements current before a plan; no use in past 7 years	Any company	Any company
Typical length	Weeks to propose and vote; plan runs longer	Weeks to months	Months or longer
Creditor outcome	Median 20 cents in the dollar (ASIC, 2022–24)	Depends on the deed	Often little — 4% of standard smaller CVLs paid a dividend (ASIC)
Practitioner cost	Median around $16,000 for restructuring stage, plus plan fees	Administrator’s fees	Average around $18,000 for standard smaller CVLs
Standard DPN (within 21 days)	Remitted	Remitted	Remitted
Lockdown DPN	Not remitted	Not remitted	Not remitted
Personal guarantees	Survive	Survive	Survive

Small business restructuring (SBR)

What it is. Introduced in 2021 for smaller companies. Directors appoint a registered small business restructuring practitioner. The company has generally 20 business days to propose a restructuring plan, and creditors then have 15 business days to vote. If creditors holding a majority by value of the votes cast accept, the plan binds unsecured creditors.

Who can use it. Companies with total liabilities not exceeding $1 million on the day restructuring begins. Before a plan can be proposed, any employee entitlements already owing, super included, have to be paid, and every tax lodgement has to be brought up to date. The company and its directors must not have used restructuring or simplified liquidation in the previous seven years.

What it costs and achieves. ASIC’s June 2025 review of SBR found median practitioner remuneration of around $16,000 for the restructuring stage, with plan-stage fees usually a percentage of payments to creditors. The median dividend was 20 cents in the dollar, and around 87% of money distributed to unsecured creditors went to the ATO. Any pre-insolvency adviser or referral fees are extra.

What it won’t do. The ATO says a successful SBR will not remit a lockdown director penalty, or a standard penalty that wasn’t remitted within 21 days. Personal guarantees aren’t released. And it uses up your seven-year allowance.

What the ATO looks for. The ATO supports plans that give creditors a better return within a reasonable time than winding up would, without public-interest concerns. Industry reports during 2026 suggested it was scrutinising viability and compliance more closely.

More: small business restructuring.

Voluntary administration (VA)

What it is. The directors (or occasionally others) appoint an independent administrator, who takes control of the company. The administrator investigates, reports to creditors, and at a second meeting creditors decide whether to accept a deed of company arrangement, return the company to the directors, or put it into liquidation.

Who uses it. Any company can, but it’s more common for larger or more complex companies, or those not eligible for SBR — for example because liabilities exceed $1 million.

What it achieves. A DOCA can let a business continue while creditors accept a compromise. The ATO, often a major creditor, votes on that outcome.

What it won’t do. You lose control during the administration. Lockdown penalties and personal guarantees survive.

Liquidation

What it is. A registered liquidator takes control, sells assets, investigates the company’s affairs and directors’ conduct, reports suspected offences to ASIC, and pays creditors in the order the law sets — after the liquidator’s own fees. A liquidation can be voluntary (creditors’ voluntary liquidation) or court-ordered, for example after an ATO wind-up application.

What it costs. ASIC’s 2024 data on smaller liquidations found average liquidator remuneration of about $18,000 for standard CVLs with liabilities of $1 million or less (about $19,600 for simplified liquidations), and that remuneration made up most of what was paid out. Only 4% of standard smaller CVLs paid unsecured creditors anything.

What follows the director. Lockdown director penalties, personal guarantees, possible claims for unfair preferences or insolvent trading, and — for directors involved in two or more failed companies in certain circumstances — possible disqualification by ASIC.

More: liquidation and ATO debt.

Where safe harbour fits

Safe harbour isn’t an appointment; it’s a protection for directors from insolvent-trading liability while they pursue a course of action reasonably likely to lead to a better outcome than immediate administration or liquidation. It depends on paying employee entitlements (including super) and meeting tax lodgement obligations. It doesn’t stop director penalties. See safe harbour and tax debt.

How to decide whether you need any of these

Work through these questions with your accountant:

1. Is the business viable once the ATO debt is dealt with? If yes, paying (via plan or funding) usually beats compromising.
2. Is any of the debt locked down? If yes, none of the three processes removes your personal liability for it.
3. Is there security or serviceability to fund full payment? If yes, compare total costs honestly.
4. Are debts far beyond what the business could ever repay? If yes, a registered process may be the responsible path.
5. Have you used SBR or simplified liquidation in the past seven years? If yes, SBR isn’t available.

Our restructure or refinance guide walks through these in more detail.

Questions to ask any practitioner or adviser

• Are you a registered liquidator? What’s your registration number? (Check ASIC’s professional registers.)
• What will the whole process cost, in writing — including any other parties?
• Is any part of anyone’s fee a percentage of my debt?
• What happens to my director penalties, especially lockdown amounts?
• What happens to my personal guarantees?
• Will I keep control? What if the plan fails?
• Do you receive referrals from, or pay referrals to, anyone involved?

The full list is on questions to ask any tax debt adviser.

Be careful who you call

ASIC says plainly that the pre-insolvency industry is unregulated and advisers have varying qualifications and experience. The ATO lists red flags including advisers who contact you after a creditor has taken court action, charge a fee based on a percentage of your debt, know a “friendly” liquidator, or suggest moving assets without payment. Following such advice can expose you to fines, criminal conviction or jail. See the warning-signs checklist.

An illustrative comparison

A hospitality company owes about $400,000 in total, including $250,000 to the ATO, some of it locked-down PAYG withholding. The directors own a home with substantial equity, and the venue is trading profitably again.

• SBR might compromise the debts, but the locked-down withholding would remain the directors’ personal liability, and fees would apply.
• Liquidation would end a profitable business, with fees from its assets — and the lockdown liability would still be theirs.
• Funding — a second mortgage paying the ATO in full — keeps the venue, removes the director penalties and involves no practitioner fees. The repayments fit the venue’s current trading.

For this company, funding is the stronger option. Change the facts — no equity, falling trading, debts double what they are — and the answer could reverse.

What happens to your staff, suppliers and customers?

The formal processes affect more people than the directors, and it’s worth thinking about them before you choose.

Staff. In SBR, the business usually continues and staff keep working — though entitlements that are due, including super, must be paid before a plan can be put to creditors. In administration, the administrator decides whether to keep trading and which staff to keep. In liquidation, employment usually ends, and unpaid entitlements become claims in the liquidation, with a government scheme able to cover some employee entitlements in certain circumstances.

Suppliers. Formal appointments are public. Suppliers often tighten terms, ask for cash on delivery or stop supply until they understand the situation. In SBR and administration, existing unsecured supplier debts are generally frozen, which helps cash flow but can strain relationships.

Customers. Customers may worry about warranties, deposits and continuity. Clear, early communication matters in every process.

By contrast, paying the ATO in full — from cash, a plan or funding — involves no formal appointment, so there’s nothing for suppliers or customers to react to.

A short glossary

• CVL (creditors’ voluntary liquidation): a liquidation started by the company’s members, usually on the directors’ recommendation.
• DOCA (deed of company arrangement): a binding compromise with creditors, proposed during voluntary administration.
• Restructuring practitioner: a registered liquidator appointed to oversee a small business restructure.
• Simplified liquidation: a lower-cost liquidation process for eligible small companies.
• Unfair preference: a payment to a creditor before liquidation that a liquidator may be able to recover.
• Lockdown DPN: a director penalty for GST or PAYG withholding reported more than three months late, which only payment remits.

Talk to a funder before you sign anything

If your company is viable and you’d like to know whether paying the ATO in full is possible, see if you qualify before you sign an engagement letter or a consent to act. There’s no credit check to enquire, your details stay with one team rather than being forwarded to a crowd of lenders, and a real person will be honest with you — including if a registered process is the better path. Please give accurate figures, especially lockdown amounts and guarantees.