Small Business Restructure (SBR) vs. Liquidation: What’s the Difference?

Written By Monica Nava

Introduction

When a company is struggling with mounting tax debts or cash flow issues, directors are often faced with two serious options: Small Business Restructure (SBR) or Liquidation. While both are formal insolvency processes under Australian corporate law, they are fundamentally different in outcome, control, and long-term impact.

This article will break down the key differences between SBR and liquidation, helping you understand which one may be right for your situation — and why acting early is critical.

At a Glance: Key Differences Between SBR and Liquidation


What Is a Small Business Restructure (SBR)?

The Small Business Restructure is a streamlined debt restructuring process introduced by the Australian Government in 2021 to support viable small businesses experiencing temporary financial distress.

It allows companies to work with a Small Business Restructuring Practitioner (SBRP) to propose a formal repayment plan to creditors — often reducing ATO and other debts by up to 70% — while continuing to trade under director control.

✅ Best for: Companies that are viable but drowning in ATO debt, super or supplier bills.

What Is Liquidation?

Liquidation is the formal winding up of a company that is insolvent and cannot pay its debts. A registered liquidator is appointed to:

  • Sell all assets

  • Investigate director conduct

  • Distribute proceeds to creditors

  • Deregister the company

Once liquidation begins, directors lose control and the company is permanently shut down.

✅ Best for: Businesses that are no longer viable, with no realistic chance of recovery.

How to Choose Between SBR and Liquidation

Ask yourself:

  1. Is the business fundamentally viable?
    If yes → SBR may be a better option

  2. Are all tax returns and BAS up to date?
    If yes → You’re likely eligible for SBR

  3. Are you still trading or generating income?
    If yes → Restructure might help you stay open

  4. Is the company already facing legal action or a wind-up notice?
    If yes → Liquidation might be more appropriate

Advantages of SBR Over Liquidation

  • Retain your business and keep trading

  • Avoid the stigma of liquidation

  • Save staff and customer relationships

  • Restructure debt legally and transparently

  • ATO generally supports SBR over forced wind-ups

Warning Signs You’re Headed Toward Liquidation

  • Company owes over $100k in ATO debt

  • Received a Director Penalty Notice (DPN)

  • Superannuation is unpaid

  • Creditors are issuing statutory demands

  • Bank account has been frozen by the ATO

What to Do Next

Don’t wait until liquidation is your only option. Directors who act early have more tools and flexibility — especially with the SBR process.

Speak to a licensed Small Business Restructuring Practitioner (SBRP) today for a confidential review of your situation.

References

  1. Australian Securities and Investments Commission (ASIC) – Restructuring and the Restructuring Plan

  2. Corporations Amendment (Corporate Insolvency Reforms) Act 2020 (Cth)

  3. Australian Restructuring Insolvency & Turnaround Association (ARITA) – Insolvency Types Explained

  4. Australian Government Treasury – Insolvency Reforms to Support Small Business

Monica Nava
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Step-by-Step Guide to the Small Business Restructure (SBR) Process