PPSA amendments and review

Since its Australian implementation, the Personal Property Securities Act (PPSA) has received mixed reviews. While the PPSA can increase clarity as to the rights of competing creditors, unless expert advice is sought the legislation often creates confusion for business operators, financiers and insolvency practitioners alike.

Now that the PPSA has been in effect for over two years, the government is taking steps to clarify the legislation.

Amendments to the PPSA

As of 1 July 2014, the definition of ‘motor vehicle’ will be amended to require all of the following:

  • capable of a speed of at least 10km per hour; and
  • containing engine(s) with a total power greater than 200W; and
  • has a VIN, manufacturers number, or chassis number.

Previously, the definition required that either the motor vehicle was capable of a speed of at least 10km per hour, or had one or more engines with a collective power of greater than 200W.

This amended definition seeks to reduce the scope of assets characterised as ‘motor vehicles’.  However, the definition remains sufficiently broad that equipment not traditionally regarded as a ‘motor vehicle’ will remain caught by the definition.

It is also anticipated that the government will amend the definition of ‘PPS Lease’ to remove the 90 day timeframe applicable to serial numbered assets (ie motor vehicles, water craft, aircraft and some intellectual property). Should that amendment take place, for an asset to be subject to a PPS Lease, it will be necessary that the term of the arrangement be for more than 1 year, or an uncertain term.  While this amendment is intended to assist hire companies, whether the aim is achieved will depend upon the precise form of the revised definition.

Review of the PPSA

The government has also commissioned a review of the PPSA to be undertaken and presented to the Attorney-General and Parliamentary Secretary by 30 January 2015.  The review will encompass matters including the following:-

  • the effects of the PPSA on Australian businesses, consumers, business finance markets and consumer finance markets;
  • the level of awareness and understanding of the PPSA at all levels of business (and particularly small business), and the frequency of non-compliance with the regime;
  • opportunities to increase efficiencies in the PPSA, including simplification of the PPS Register;
  • the scope and definitions of personal property covered by the PPSA;
  • whether to implement thresholds for the operation of the PPSA regarding particular types of personal property; and
  • interaction with other legislation, such as the Corporations Act 2001.

In our experience, a significant component of the market’s confusion with the PPSA relates to the legal intricacies concerning when the legislation applies and its effect.  Time will tell whether these steps go far enough to clarify the uncertainty.


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