All entities risk losing assets to third party creditors under the Personal Properties Securities Act unless they take steps to protect their title through appropriate documents and action (typically registration on the PPSR).
For SMSF trustees, a failure to take action has the additional sting of potentially subjecting the fund to non-compliance and other penalties such as a substantial tax obligation, particularly where it involves assets used by a related party.
SMSF trustees should be aware of these PPSA issues where they:
- lease goods to other entities (including collectibles such as artwork, boats, jewellery etc.)
- enter into hire purchase agreements with SMSF assets
- place goods with another on consignment for sale.
If an SMSF trustee does any of these things then it is critical that trustees seek advice to ensure the transaction is fully documented in accordance with relevant PPSA provisions and registered properly on the PPSR.