SBR scheme set to transform insolvency landscape: Insolvency Australia

The most recent Corporate Insolvency Index from Insolvency Australia highlights the positive impact of the small business restructuring (SBR) scheme on Australia’s business recovery landscape.

According to the index, SBRs increased three-fold in the first half of the 2025 financial year, highlighting the popularity it had gained as more directors sought intervention to preserve businesses and jobs.

Insolvency Australia director Gareth Gammon said he expected to see the mechanism continue gaining momentum as businesses tried to tackle and navigate the insolvent environment.

“Collaboration and restructuring are now being prioritised over ‘traditional’ liquidation,” he said.

“This change in mindset has positioned liquidators as pivotal advisers for distressed businesses – and it will have positive implications for long-term economic stability.”

In the first half of the 2025 financial year, 10,268 appointments were recorded, which reflected a 53 per cent increase year on year compared to the previous corresponding period.

“This surge reflects the ongoing impact of tightened credit conditions and economic pressures, particularly on smaller businesses. That’s in addition to the ATO’s singular focus on receiving accrued tax debt,” Gammon said.

It was noted the ATO had clearly outlined it intended for businesses to stop trading while insolvent and unable to pay their debts.

Business Reset founder Jarvis Archer said that based on the outlook for the rest of the financial and calendar year, there was no hiding for businesses in debt to the Tax Office.

“The economic environment continues to pose challenges for Australian businesses,” he said.

“Persistent inflation, high interest rates, reduced consumer spending and increased supply chain costs have some businesses struggling to balance cash flow. The pressure is particularly pronounced for businesses that took on pandemic-era debt.”

The latest version of the index also detailed the appointment volume by state and territory, top firms by appointment value, top liquidators by appointment volume, comparison of Q2 volumes and comparison of H1 volumes.

It was shown in the index that Victoria stood out with a 77 per cent growth in insolvencies compared to the first half of 2024, driven by increased restructuring engagements.

South Australia experienced the most dramatic growth with a 90 per cent rise, while Tasmania recorded a 127 per cent surge; however, this was based on its smaller population.

The index also outlined that NSW and Queensland maintained the largest appointment values of 3,800 and 1,878, an indication of continued pressures with those regions.

Based on the index results, Archer said it was hard to understate how transformative an SBR could be for small business owners.

“They change lives – and that’s a good thing for them, everyone who deals with their business, and for the economy generally. A business trading to the bitter end, or shutting down, causes losses and doesn’t result in creditor returns,” he said.

“Despite its critics that say SBRs are just delaying inevitable failure, we’ve seen strong success, with less than five per cent of over 200 SBR proposals accepted by creditors being terminated before completion.”