Can You Do a Small Business Restructure (SBR) While Being Audited by the ATO?
When a business is under financial pressure, ATO audits can add to the stress and uncertainty. Many directors wonder if they can still access formal debt solutions — such as the Small Business Restructure (SBR) — while undergoing an ATO audit.
The short answer is: Yes, but with conditions.
What Is the SBR Process?
The Small Business Restructure is a government-endorsed process that allows eligible small businesses to formally restructure their debts while continuing to trade. It’s administered by a licensed Small Business Restructuring Practitioner (SBRP) and provides businesses with protection from unsecured creditor action during the plan proposal period.
Once a plan is approved by creditors — particularly the ATO — the business can repay reduced debts over time, often at a significant discount.
Can You Enter SBR While Being Audited?
Being audited by the ATO does not automatically disqualify a business from accessing the SBR process — but there are important considerations.
You Can Proceed If:
You still meet the eligibility criteria (e.g. debts under $1 million, up to date with BAS/lodgements).
The audit does not impact your total liabilities beyond the eligibility threshold.
The business and directors are acting in good faith and cooperating with the audit.
You May Be Blocked If:
The audit uncovers undeclared tax liabilities that push your total debts over $1 million.
The ATO places a hold on your account pending the outcome of the audit.
There are signs of fraud or phoenix activity, which may disqualify you from formal restructuring pathways.
ATO’s Role as a Creditor
The ATO is often the largest unsecured creditor in most SBR plans, and their vote is critical. If the ATO is actively auditing your business, they may be more cautious or resistant to accepting the plan — unless:
You engage early and transparently.
The restructure shows a genuine ability to repay.
The SBR Practitioner has prepared a realistic, well-supported plan.
Strategy: Engage a Restructuring Practitioner Early
If you’re under audit and considering SBR:
Seek advice early from a licensed restructuring practitioner.
Disclose the audit upfront to ensure accurate planning.
Ensure all lodgements are current — a key eligibility requirement.
Ask your practitioner to liaise with the ATO and navigate the audit implications.
A good SBR practitioner can help present your case professionally, improving your chances of creditor approval.
Alternatives if SBR Isn’t Available
If the audit results in ineligibility, you may still have options, such as:
Voluntary Administration (VA): for companies with complex creditor issues.
Informal arrangements or ATO payment plans.
Liquidation: if the business is no longer viable.
References
Australian Taxation Office – Debt and Lodgment Compliance
Corporations Act 2001 – Part 5.3B (Restructuring of a Company)
Treasury – Insolvency Reforms for Small Business
