PPS Leases - Changes affecting equipment hire businesses

On 20 May 2017, changes were made to the Personal Property Securities Act 2009 (PPSA) to reduce the PPSA’s impact on short-term equipment hire businesses. 

Previously the PPSA provided that leases and bailments of equipment either for an indefinite term or a term of more than one year were “PPS Leases” giving rise to a “security interest”.  If the owner of the equipment did not register this security interest on the Personal Property Securities Register (PPSR) then they risked losing priority as a secured creditor and also risked losing ownership of the goods in the event of insolvency of a customer.

As of 20 May 2017, short-term equipment hire arrangements will now only be subject to the PPSA if:

  • They are initially for two years or more; or
  • The lessee or bailee ends up holding the equipment for two years or more.

These changes should result in significantly fewer short-term hire arrangements being subject to the PPSA and therefore reduce the administrative burden placed on short-term equipment hire businesses, many of whom are small to medium sized enterprises.

It is important to note that these changes only apply to arrangements entered into on or after 20 May 2017.  The old rules will continue to apply to arrangements entered into prior to this date.

Further information on the changes can be found via the PPSR website - https://www.ppsr.gov.au/legislation/pps-lease-change-2017

Patrick Connelly

26 July 2017