The PPSR can be used to help protect your assets and income through a very specialised process.
What is the PPSR?
The Personal Property Securities Register (PPSR) is an official government register that functions as a 24/7 online public noticeboard of who has a security interest in certain assets. It can include cars, company assets, boats, used goods and intellectual property, but doesn’t include land or fixtures.
It’s relatively new – only coming into effect in 2012. But it can be a very useful tool for legally binding asset protection when done correctly.
There are three different PPSR asset protection methods…
1 – Income Protection: Registering goods and services customers
If you’re someone who sells goods and services, the first way you can use the PPSR to protect your property is by registering all your customers to ensure you get paid if anything happens to them.
For example, if you laid flooring in a customer’s place of business and they go into liquidation before paying their bill, you can’t get your bill paid, or the cost of your materials and labour back. You’re an unsecured creditor at the bottom of a long list of other creditors the liquidators have to pay. At most you’ll only get a couple of cents per dollar repaid of what you are owed.
If you register that client through the PPSR, you can become a “Priority Creditor”. If your customer goes under, you will be at the top of the list to get the amount you are owed when their assets are liquidated.
You can implement this for every client by including a clause in your terms of trade that specifies that all your clients will be registered on the PPSR. Each client is registered on the PPSR, and then whenever you invoice them you lodge that invoice to record the credit.
The PPSR fee is only $6 per client for 7 years on the register.
2 – Asset Protection: Loaning through a Trading Company
The next two options are to protect you if your own business gets into financial trouble. If your business is going into liquidation, a liquidator can access all assets associated with your business.
If you have substantial retained profits in your trading business, the assets of your business are at risk. Through the utilisation of holding companies and dividend reinvestment strategies a loan can be created between your holding company and your trading business which can be registered as a “Priority Creditor” on the PPSR. You are a Priority Creditor then get priority access to the assets of the trading business to repay your loan entitlement.
3 – Asset Protection: Trading & Registering Assets
As we’ve covered, liquidators can seize all assets belonging to a trading business including assets in related entities if not structured correctly. This means that equipment located on your trading businesses factory floor is at risk of being sold off by a liquidator to pay debts even if it is not owned by the trading business.
This isn’t as simple as just buying the assets using a different entity. You need to buy them in a separate legal entity and then officially lease them to your trading business and register that lease on the PPSR.
This needs to be done correctly, otherwise the assets (in this case factory equipment) will be assumed to belong to the trading business when liquidators are appointed and remove everything from the factory floor. You need the PPSR registration to prove that, not only did they not belong to the trading business and therefore can’t be seized, but the cost of these assets is owed by a separate entity as a Priority Creditor.
It doesn’t just apply to factory equipment – it can be any asset belonging to a company aside from land and water rights.
Engaging a PPSR Asset Protection Expert
Protecting your assets through the PPSR is a highly complex and specialised service. It is not something we encourage clients to try and do themselves – it could leave you very vulnerable to heavy financial losses.
Our trusted provider for this service is Andrew McLellan from EDX Registration Services Melbourne. We have worked with Andrew for many years and work in partnership with him to supply asset protection services to our clients.
We help ensure Andrew has access to important financial documents to complete the registration. We also provide advice on structuring issues to ensure that your business structures are set up correctly to take full advantage of the PPSR regime. Andrew takes care of the PPSR registration and ensures it is correct and legally binding. He will even remind you in 7 years when you need to re-register clients again!
To contact Andrew about PPSR Asset Protection services, complete the enquiry form below.
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