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Protect Your Business from Client Liquidations

PPSA Personal Property Securities Register –
Protect Your Business from Client Liquidations with the PPSR (2022)


Today we are going to discuss how use the PPSA and Personal Property Securities Register to save your business 10’s if not 100’s of thousands of dollars when one or more of your clients goes into administration or files for liquidation.

It is without a doubt the biggest change in legislation in the last 25 years that very few business owners are aware but has the potential to cost you everything.

I’m not exaggerating when I say, the next few minutes could be the difference between the success and failure of many businesses in Australia. Every business owner needs to know this information.

So today we are going to discuss,

  • What the Legislation is this legislation and how it works,
  • What the changes in legislation mean for your business,
  • How you can protect your business for less than $1 / year,

What Is The PPSA Legislation?

Now the legislation I have been referring to is the PPSA or Personal Property Securities Act. It’s the piece of legislation that outlines the legislation changes and how they affect your business. The PPSR or Personal Property Securities Register is the government-run electronic register, or notice board, in which these changes to your business are implemented.

Look It’s ok, the reason for this Blog is that most businesses or business owners don’t know about this legislation. So, stay with me and it will all be revealed.

The PPSA (the legislation) became legislation in January 2012 but wasn’t really implemented until January 2014. However, it wasn’t until about 2017/18 that we started seeing the real impacts on businesses to the point now in 2022, those who know about the PPSA and how it works, are seeing 100’s of businesses impacted almost continuously.

And these businesses, probably much like yourselves, had no idea about the PPSA until it started costing them 10 if not 100’s of thousands of dollars, and in a lot of cases forcing the closure of their businesses.

But there is good news, as I said earlier, you can protect your business for less than $1/ year.

Let’s start at the beginning,

History of the PPSA

When the PPSA was introduced, it replaced about 30 other registers throughout Australia. One of the most obvious was REVS or Register of Encumbered Vehicles. It is where everyone including the banks went when they were purchasing or financing a vehicle to ensure that no other security interests had been registered against the vehicle in order to gain freehold title. 

As you can imagine no one wants to spend $20k on a vehicle only to be told 3 months later that a bank already had a security interest over that vehicle as collateral for the previous owner’s finance, and are now taking back the vehicle.

Well now REVS along with 30 other registers throughout Australia no longer exist, if you do a google search for REVS you are automatically taken to the Personal Property Securities Register.

The PPSR is now the only place you can register any form of security interest between 2 parties (excluding Bricks and Mortar Mortgages).  All other forms of security now need to be registered on the PPSR to be valid.

 So, if you go to the bank to finance the purchase of a new vehicle, they have to register their interest in that vehicle on the PPSR. Pretty straight forward right.

Well, here is where it gets interesting.

Banks & the ATO No Longer Have Priority

Before the introduction of the PPSA, Banks and maybe the ATO broadly speaking were the only entities that were recognised as secured creditors. Most businesses know from experience that before the introduction of the PPSA if one of their clients went into liquidation the Banks and the ATO were the ones to get paid first (as a secured creditor) and everyone else, again broadly speaking, were classed as unsecured creditors ending up with 3 or 4 cents in the dollar.

Since the introduction of the PPSA, that is no longer the case.

Now any business that extends credit can register on the PPSR at a cost of a $6 PPSR Registration for seven years, becoming a secured creditor for less than $1 / year with the same protection as the banks.

But before I go into explaining how that works, I need to explain why it is so important.

The PPSA is probably going to impact most businesses in the next few years.

If you extend credit to your clients, then I am probably talking about you.

And the potential impact will see you having to potentially return the last 6-months’ worth of payments you have received from any of your clients who file for liquidation. 

Let me explain in basic terms,

Liquidation In Basic Terms

When a company files for liquidation, a liquidator is appointed who starts the process of liquidating the assets of the business, their job is to make sure that the secured creditors get paid.

If in that process the liquidator identifies that there isn’t going to be enough in liquidated assets to pay the secured creditors, the liquidator now uses the PPSA Legislation to identify which of the creditors are secured and which are not.

If you have spent the $6 are registered on the PPSR and have a valid legally binding registration, you are classed as a secured creditor. If you haven’t you are automatically an unsecured creditor. 

Why is this important? Well, let us say for the sake of this argument that one of your clients in the next few years files for liquidation. Not a very big stretch in today’s economic climate, is it?

What normally happens is that a liquidator is appointed to your client’s business and starts the process of liquidating the assets. If in that process the liquidator realised that the returns from your clients liquidated assets is not going to be enough to pay the business's secured creditors, the liquidator is obliged to identify any Unfair Preference Payment. These are payments made to any unsecured creditors (businesses who haven’t already registered on the PPSR) in the previous 6 months.

In other words, if one of your clients has paid your business in the previous 6 months, (prior to going into liquidation), and you haven’t already registered on the PPSR (becoming a secured creditor in the process), but hasn’t paid other businesses who have, then the liquidator is required to demand that money back.

It’s called Preferential Payment Clawback

Preferential Payment Clawback in Basic Terms

What generally happens is that the liquidator assesses the assets of the business that’s is going into liquidation. They then go to the PPSR and get a copy of all the secured creditors and if they assess there’s more money owed to the secured creditors than the liquidated assets of the business, the PPSA Legislation allows the liquidator to simply claw back any payments made to unsecured which they deem to have been made to preference to the secured creditors, essentially those businesses who have registered on the PPSR.

So, let’s take a second to review what I just said,

  • If one of your clients goes into liquidation at some point in the future
  • And the liquidated assets of the business aren’t enough to pay the secured creditors
  • A liquidator has the legal right to claw back all payments that your client has paid your business in the previous 6 months.

Now before you start saying, No That Can’t be Legal, I have a few examples to show you in a second.

Preferential Payment Clawback usually takes the form of a letter of Demand. The Letters of Demand simply list any payments you have received in the previous 6 months from your client, explain how under the legislation you are not classed as a secured creditor and give you 7 days to pay back the money.

This is why this information is so important. The first instance you are likely to hear anything about your client going into liquidation is the Letter of Demand that arrives on your doorstep whilst you are enjoying your morning coffee.

Examples of Preferential Payment Clawback

Finding this hard to understand or believe?

Let me show you what a Preferential Payment Clawback Letter of Demand looks like.

Example 1

Protect Your Business from Client Liquidations

Protect Your Business from Client Liquidations

Protect Your Business from Client Liquidations

Now as you will see in Example 1, we have redacted the companies details that these letters were sent to but you can see the name of the builder,

The next thing you will see is that the liquidator is asking for the return of 171 000, it outlined the legislation being 588FA and part of the Corporations Act 2001, it then also outlines the 6-month Clawback Period, in this case, they call it the Relation Back Period, It also includes the invoices, the dates and the amounts,

And then to top it all off it gives the business 7 days to pay $171 000.

Example 2

Protect Your Business from Client Liquidations
Protect Your Business from Client Liquidations
Protect Your Business from Client Liquidations

And this one, Example 2 is the same as the first but for a different business which outlines,

  • the amount being clawed back being $48 000,
  • the same 6-month clawback period,
  • and again, the same 7 days to pay.

Example 3

Protect Your Business from Client Liquidations

Protect Your Business from Client Liquidations

And also here is Example 3 which is an extract from a 2016 / 2017 Creditors Report concerning preferential payments made to the ATO Totalling $52,636. You'll notice the ATO settled for 50,000 in the early stages of the liquidation.


Because the ATO knows that the legislation applies to them exactly the same as any other business.

I think you are starting to understand why this information is so important, these examples could have easily been avoided with a simple $6 PPSR Registration.

And remember I said at the very beginning, those who know about the PPSA and how it works, are seeing 100’s of businesses impacted almost continuously.

So where do you go from here?

Well believe it or not there are about 8 000 000 registrations on the PPSR at any one time.

For those of you who already know about the PPSR keep reading, because out of the average 8 000 000 Registrations on the PPSR, it’s estimated that perhaps as many as 80% or 6 500 000 were possibly registered incorrectly and potentially invalid, which means, that if you are already using the PPSR, there’s an 8 in 10 chance that maybe those registrations need to be reviewed.

The first issue is that for a PPS Registration to be valid you need to have a written agreement between the two parties involved, (usually being your business and that of your clients), which includes the appropriate legislation giving you the legal right to place registrations on the PPSR.

And secondly, that agreement must be signed by your client.

I know you might be thinking, how am I going to be able to do that?

The easiest way to do this is to have the PPSR Legislation included in your Terms and Conditions.

Now when I say Terms and Conditions most people point to the Nett 7 Days at the bottom of their invoices. Of course, that’s not a businesses Terms and Conditions

Terms and Conditions are the small writing you probably see on the back of your suppliers’ invoices. Depending on the industry you operate in they usually accompany your Credit Application Forms, or for tradies, they will accompany your Quotation or Work Approval Form. Essentially any form of communication you have with your clients. 

We have a whole separate Blog on Terms and Conditions so I am not going to go into too much detail here but essentially until you have your Terms and Conditions up to date with the latest legislation any registrations you do will more than likely be part of that 80% which will be deemed to be invalid.

And unfortunately, you will not know about it until it is too late.

If you would like to know more about "How You Can Protect Your Cashflow When One of your Clients Files for Liquidation" please feel free to request our FREE Facts Sheet here

That’s It From Me, Until Next Time

Have a Great Day

Paul Tweedie



With over 35 years’ experience Collection Consultancy Australia prides itself in offering Products and Services designed to Protect Business Assets and Cashflow. Quite often the process can start from simply making business owners aware that there is option available, through to business specific solutions and education. We are here to let business owners know that there can be a better way to secure their financial future.

Company Address

PO Box 7160,
East Brisbane QLD 4169.

Phone: 1300 565 988.


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