Small business guide
Business in financial trouble? When to talk to an insolvency practitioner
The short answer
Early, while there are the most options. For a company with total liabilities of $1 million or less, small business restructuring lets the directors stay in control while a plan is put to creditors1. Sole traders and partners have personal options through AFSA, from debt agreements to bankruptcy2.
Signs it is time to talk to someone
- Bills are being paid late because the money is not there, not because of timing.
- Tax and super debts are building up.
- You have received a director penalty notice from the ATO3.
- You are putting in personal money to keep the business going.
- Creditors are calling, or you have received a bankruptcy notice2.
The options for a company
| Option | What it means |
|---|---|
| Small business restructuring | For companies with total liabilities of $1 million or less. A restructuring practitioner helps prepare a plan for creditors, and the directors stay in control of the business1 |
| Voluntary administration | An external administrator takes control to work out whether the company can be saved4 |
| Liquidation | The company is wound up and its assets are sold to pay creditors4 |
Good to know: Small business restructuring has extra conditions, including a rule about whether the company or its directors have used it in the past seven years1.
Talk to someone early
Hear from up to three insolvency practitioners who cover your postcode. Free, no obligation, and FIZO does not share your request with anyone else.
If you are a sole trader or partner
A sole trader's business debts are personal debts, so the options are personal ones. The Australian Financial Security Authority (AFSA) explains them: informal arrangements with creditors, a debt agreement, a personal insolvency agreement, or bankruptcy2. Each has different consequences, and AFSA has a tool to compare them2.
Who to talk to
A registered liquidator handles company restructuring, administration and liquidation. A registered trustee handles personal insolvency. Your accountant or tax agent is often the first call, and can tell you when it is time to bring one in.
Who can help
Questions people ask
What is small business restructuring?
A process for companies with total liabilities of $1 million or less, where a restructuring practitioner helps prepare a plan for creditors while the directors stay in control1.
What options does a sole trader have if they cannot pay their debts?
AFSA lists informal arrangements, debt agreements, personal insolvency agreements and bankruptcy2.
What happens if I ignore a director penalty notice?
The ATO can start recovering the debt from you personally 21 days after it issues the notice3.
Talk it through with a professional
Tell us once and hear from up to three insolvency practitioners who cover your postcode. Free, no obligation, and FIZO never recommends one over another.
Sources
- ASIC, Small business restructuring and the restructuring plan
- AFSA, I can't pay my debts
- ATO, Director penalty regime
- ASIC, Insolvency information for directors
FIZO is a directory, not a tax or legal adviser. Rules and thresholds change: check the source, or ask a registered professional about your own business.