As anticipated after the Parliamentary review of the Personal Property Securities Act 2009 (PPSA) completed earlier this year, and with the aim of reducing the number of lease transactions that fall within the scope of the PPSA, the Australian Parliament has recently passed legislation amending the PPSA with respect to what is a PPSA lease.
The amendment will mean that clause 13(1)(e) of the PPSA will be repealed. At this stage, it is anticipated that the amendment will come into effect on 1 October 2015, however this date is not yet confirmed.
Clause 13(1)(e) of the PPSA currently provides that a lease of serial numbered goods (for example motor vehicles) is a lease under the PPSA if it is for a term of 90 days or more, whether that is made up of a single set term, an initial term with options, or is the period that the lessee actually retains possession of the property.
When the amendment takes effect and clause 13(1)(e) is repealed, any lease of serial numbered property to a commercial customer for a term of less than 12 months (including any option terms) will not be a PPSA lease, and registration under the PPSA will not be possible or necessary in order to protect an ownership interest. Any lessor should however be able to provide proof of ownership, to avoid any risk of loss.
Even after the amendment takes effect, the remainder of clause 13 will continue to apply, which means that certain lease transactions will continue to be PPSA leases, and registration of any lessors’ interests under such leases should be considered and if necessary made to protect the lessor.
This amendment is aimed to reduce the complexity, time and cost for parties entering into hire or lease arrangements with commercial customers.
We will continue to provide updates as they are available, and will confirm the effective date of the amendment as soon as it is available.
If you would like more information or advice on whether a lease is a PPSA lease or on the impact of the amendment for your business, please do not hesitate to contact Kellie Cook or Emma Leys on +61 8 9321 3755.