The Personal Property Securities Act 2009 (Cth) (PPSA) is widely regarded as the most significant change to the law in Australia since the introduction of the GST and has the potential to materially reduce the effectiveness of existing asset protection structures. Corporate groups, advisers and accountants should consider the impact of the PPSA, particularly in a tough economic market and where clients seek to separate asset ownership from business risks.
What’s the big deal with the PPSA?
The intent behind the PPSA is to create a single register known as the Personal Property Securities Register (PPSR) where all forms of ‘security interests’ in respect of ‘personal property’ must be registered. Failure to register a security interest on the PPSR may mean that the interest is lost through a subsequent transaction involving the ‘personal property’.
Under the PPSA there are two key concepts:
- ‘personal property’ which is defined as all property (including a licence) but excluding land, interests in land and certain other excluded assets, and
- ‘security interests’ which is broadly defined as an interest in personal property arising from a transaction that, in substance, secures payment of money or the performance of an obligation.
Critically, transactions that have not typically given rise to security interests such as rental, leasing and hire arrangements may constitute security interests that require registration on the PPSR to be enforceable against third parties (including receivers or other creditors).