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How You Could Lose Your Trusts Assets Overnight

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Protect Your Business Assets From Changes In Legislation Affecting Trusts (2022)

Overview

Recent changes in legislation negate the asset protection traditionally associated with your Business or Family Trust. In essence, if you’re using a trust at the moment to protect your business assets and you haven’t updated your structure, those assets are more than likely no longer protected.

So today we are going to discuss,

  • What are the changes in legislation now affecting your trust,
  • Why your trust no longer protects your businesses assets,
  • How you can start protecting your trust assets for as little as $6,

Trust History

Now you may or may not be aware but there were some major changes in legislation that have forever changed the protection provided by traditional trusts.

For the past 30 to 40 years businesses have been established using a trust or holding company to protect the assets of a business, and then a separate trading entity that operates the business and essentially holds all the risk.

This was originally designed to ensure that should your trading entity experience future financial difficulties; your Business assets were always protected.

Unfortunately, This is No Longer the Case

New Legislation

In the last few years, the Australian Government introduced a piece of legislation called the Personal Property Securities Act. Along with the Act also came its registry, which is basically a government online message board / Electronic Register which is called the Personal Property Securities Register or PPSR. 

The PPSA is the Act or the piece of legislation, and the PPSR is the Government Register where you actually go to place a security interest/or record your ownership in goods or equipment, which is now required by law if you want to maintain your ownership of those goods or equipment.

Now I am not going to go into too much information on the PPSA as we have a whole separate blog that goes into a little detail about the PPSA and how it works, I will list the article in the Related Posts section if you want to go and check that out.

But here is where it gets interesting.

As a result of the PPSA Legislation, title no longer exists, or ownership no longer exists, without first being registered on the PPSR. So, if you want to maintain ownership of any goods or equipment you must register that interest on the PPSR.

So that clause on the bottom of most invoices that say, goods remain ours until they have been paid for, No Longer Valid.

Now in order for an entity to maintain ownership of their equipment, or for any PPSA Registration to be valid and legally binding, the entity registering the security interest or ownership must be able to demonstrate two key points.

  • That there is an agreement between the two entities involved which includes the appropriate legislation legally allowing for a PPSA Registration.
  • That any agreement between the two parties is signed.

This is why of the approximate 8,000,000 PPSA Registrations that are present at any one time, it is estimated that 80% are invalid.

Now don’t get me wrong if you have a business or a trading entity which also owns equipment or assets such as vehicles, trailers, conveyor systems, essentially anything of value, and you are happy for that equipment to be classed as assets of your business or your trading entity, then you don’t have to do anything. Just know that those assets will be claimed by any liquidator appointed to your business should it get into future financial issues.

Chattel Lease Agreements

However, if you have a holding company or trust wishing to maintain ownership of your existing goods or equipment then you will need,

    • An agreement between the two entities involved includes the appropriate legislation legally allowing for a PPSA Registration.
    • And that any agreement will need to be signed between the two parties.

Now, in order to get your head around this, you must remember the key difference in the legislation after the introduction of the PPSA, Title No Longer Exists without a PPSA Registration.

This means if your goods or equipment are not registered on the PPSR are being used as part of the normal operation of your business, a liquidator can seize that equipment and treat it like any other assets of the business when it comes to the liquidation of your business. And remember liquidators have seen everything, so don’t think you will just be able to remove the equipment prior to the liquidation of your business to essentially hide your assets from the liquidators, as that probably won’t work.

Real-Life Example

There was a court case not so long ago where the owner of a business thought exactly the same thing and the judge ordered the return of $1.8 million in excavation equipment to the site in which the business was operating, at which point the liquidator promptly seized the assets. In this case, there were a couple of extenuating circumstances, but you see where I’m going with this. A traditional Trust structure no longer protects the assets of your business.

So, what is the answer,

How To Protect Your Trust Assets

It is quite simple, all you need to do is have an agreement between your trust or holding company and the trading entity, which includes a list of all the appropriate equipment in the trust, and have it registered on the PPSR. But remember what I said earlier, of the 8 000 000 Registrations on the PPSR, 80% are invalid.

Any agreement between your Trust/Holding company and your trading entity must include the appropriate legislation, must include the appropriate authority to be registered on the PPSR, must be legally binding, and must be signed by representatives of both entities.

The agreements I am talking about are called Chattel Leases, they incorporate all the appropriate legislation along with an asset register, and best of all it only costs you $6 to register your Chattel Lease on the PPSR and your assets are protected for 7 years.

I hope you have found this information useful. Unfortunately, there are very few people talking about the PPSA and its impact on businesses, let alone have an understanding of its impact on Trusts, but the legislation is the legislation. And look I say this in the nicest way, you are either up to date with the legislation and are protected by it or you’re not. And unfortunately, these days, in this economic climate, it’s only a matter of time before most businesses will end up with an intimate knowledge of the PPSA Legislation.

If you would like to know more about "How You Can Protect Your Business From Losing Its Trust Assets Overnight" please feel free to request our FREE Facts Sheet here.

That’s It From Me, Until Next Time

Have a Great Day

 

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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.

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PO Box 7160,
East Brisbane QLD 4169.

Phone: 1300 565 988

Email: info@collectionconsultancy.com.au

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