SBR vs. Safe Harbour: What’s the Difference?

For Australian company directors navigating financial distress, two major tools are available under the Corporations Act to help protect the business—and themselves—from insolvency consequences: Small Business Restructuring (SBR) and the Safe Harbour provisions. While both options aim to encourage early intervention and promote business survival, they serve different types of companies and come with distinct processes, requirements, and protections.

What Is Small Business Restructuring (SBR)?

The Small Business Restructuring (SBR) process was introduced in January 2021 under reforms to Australia’s insolvency laws, specifically targeting small businesses affected by the COVID-19 pandemic and beyond. It allows eligible small companies to restructure their debts while remaining in control of their business.

Key Features:

• Available to companies with liabilities under $1 million (Corporations Regulations 2001, Reg 5.3B.01).

• Company directors remain in control during the process.

• Appointment of a Small Business Restructuring Practitioner (SBRP) is mandatory to help develop and administer the plan.

• Offers a simplified, faster, and lower-cost alternative to traditional insolvency processes.

• Creditors vote on a restructuring plan, and if accepted, debts are compromised accordingly.

Source: Australian Government – Treasury, Insolvency reforms to support small business, 2020.
https://treasury.gov.au/consultation/c2020-121588

What Is Safe Harbour?

The Safe Harbour provisions (introduced in 2017 under section 588GA of the Corporations Act 2001) provide company directors with protection from personal liability for insolvent trading, provided they are taking a course of action reasonably likely to lead to a better outcome for the company than formal insolvency.

Key Features:

• Designed for larger or more complex businesses, but available to all directors who meet eligibility.

• Directors must ensure the company is:

  • Paying employee entitlements,

  • Meeting tax obligations, and

  • Keeping proper financial records.

• Unlike SBR, Safe Harbour does not involve a formal process or court appointment.

• It's a protection mechanism, not a restructuring framework itself.

Source: Australian Government – Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Act 2017.
https://www.legislation.gov.au/Details/C2017A00073

Key Differences Between SBR and Safe Harbour

FeatureSmall Business Restructuring (SBR)Safe HarbourEligibilityCompanies with less than $1M in liabilitiesOpen to all directors of companies (no size limit)Control of BusinessDirectors remain in controlDirectors remain in controlProcess TypeFormal restructuring process under the Corporations ActInformal protection from insolvent tradingInvolves Creditors?Yes – creditors vote on the restructuring planNo formal creditor involvementProfessional RequiredMust appoint a Registered SBR PractitionerAdvised to consult professional advisors but not mandatoryKey BenefitDebt compromise with creditor approvalPersonal protection from liability for insolvent tradingCost and SpeedLower cost, faster for small businessMore flexible but can be complex and costly for larger businesses

When to Use SBR vs. Safe Harbour

• Choose SBR if you're a small business with manageable debts under $1 million and want to propose a formal restructuring plan to creditors with the help of a registered professional.

• Choose Safe Harbour if you're a director of a company in financial distress and are actively working on a recovery strategy that could deliver a better outcome than administration or liquidation, and you need protection from insolvent trading claims while you do so.

Both options can also be used in tandem, depending on the situation. For instance, a director may enter Safe Harbour while evaluating whether to initiate SBR or another restructuring pathway.

Final Thoughts

SBR and Safe Harbour are both part of Australia’s modern approach to corporate insolvency—encouraging directors to act early, seek advice, and pursue turnaround strategies rather than waiting for liquidation to become inevitable. Knowing the differences between these tools is critical for choosing the right path and protecting both your business and your personal liability.

If you’re unsure which option best suits your situation, it’s wise to consult an experienced insolvency practitioner or restructuring advisor. Early action can make all the difference.

Need help deciding between SBR or Safe Harbour?
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