The introduction of the Personal Property Securities Act (PPSA) and a fundamental shift in how the High Court looks at trusts are worrying business owners, their accountants and others who try to protect their assets.
“These changes mean that asset protection methods and asset protection plans made and implemented even 18 months ago need to be reviewed” says Vince Tripodi, Director of Perks Integrated Business Services.
The introduction of the PPSA means that the implementation of particular corporate structures for certain asset protection outcomes could now be ineffective.
When setting up a business, it is common practice to establish a holding entity (trust or company) in order to protect business assets from the risk of the operating entity. The operating entity then leases/hires the assets from the holding entity.
Prior to the commencement of the PPSA, the assets held by the holding entity would be protected from creditors of the operating entity.
However, under the new law, the assets being leased/hired must be registered on the Personal Property Securities Register in order to achieve maximum protection. If the security interest is not registered such arrangements may be ineffective and expose the assets of the holding company.
The use of trusts as part of an asset protection strategy also needs to be reviewed as a result of the recent decision by the High Court in the Donavan V Sheahan case.
The decision in this case can allow in certain circumstances creditors to claim against the assets of a trust that is controlled by a bankruptee.
“Confidence in the use of trusts for asset protection should not be rocked by this decision but it is pertinent that all trust structures are reviewed to ensure maximum protection” says Vince Tripodi.
“Your asset protection strategies shouldn’t be a set and forget plan. It is important that you review them frequently. Things are constantly changing and you don’t want to be caught out” says Vince Tripodi.
For more information or a complete review of your asset protection strategies call Perks on 8273 9300.
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