Small Business Restructure vs. Voluntary Administration: What’s Better?

When a company is struggling with unmanageable ATO tax debt or cash flow issues, directors often face a difficult decision: Small Business Restructure (SBR) or Voluntary Administration (VA). Both are formal insolvency processes under Australian law—but they’re designed for different circumstances.

What Is a Small Business Restructure?

Small Business Restructuring was introduced by the Australian Government in 2021 to help viable small companies resolve their debts while keeping control of their business.

Key features:

• Director remains in control during the process

• Simplified and fast-tracked process (20 business days)

• Focuses on negotiating a restructure plan with creditors (usually the ATO)

• For companies with less than $1 million in liabilities

• Requires all tax lodgments to be up to date

Best suited for: businesses with ATO tax debt or supplier pressure but that are still operational and have a realistic path to recovery.

What Is Voluntary Administration?

Voluntary Administration (VA) is a more comprehensive formal insolvency option where directors hand control over to a registered insolvency practitioner (administrator) who assesses the business and recommends:

1. Return the business to the directors

2. Approve a Deed of Company Arrangement (DOCA)

3. Liquidate the company

Key features:

• Director loses control during the process

• Often costly and complex

• Used when financial distress is severe or multiple legal threats exist

• Creditors vote on the outcome

Best suited for: larger or more complex companies facing aggressive creditor action, or where there are disputes between directors or major legal risks.

Key Differences at a Glance

Which Is Better?

If your company has manageable tax or trade debt and is otherwise viable, Small Business Restructure is often the better, faster, and more affordable choice.

However, if the company is facing legal action, has large secured creditors, or internal disputes, Voluntary Administration may be the only viable path to protect the business or its assets.

Final Word

Choosing the right path depends on how severe your financial situation is, and whether your business can realistically trade through. A licensed restructuring practitioner can help assess eligibility and walk you through your options confidentially.

References

1. ASIC – Restructuring and the Restructuring Plan

2. Australian Taxation Office – Small Business Restructure Overview

3. Treasury – Small Business Debt Restructuring Fact Sheet

4. ASIC – Voluntary Administration Process Explained