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eNewsletter February 2014 
 
 

Brought to you from Marius De Lange

Partner and Business Services Manager

 

 

What's It Mean?

Terminology – Personal Property Securities Act 

Grantor
– the party against which that the security interest is registered.
 
Secured Party
– the party that holds the security interest.
 
Collateral
– the party which is secured by the security interest.
 
PMSI
– a Purchase Money Security Interest.  The interest secures unpaid purchase price and has a high priority when registered correctly. 

           



ATO app for small business
There is now an ATO app available for small businesses to access business assistance, useful calculators and tax information, when you are on the move.

You can use the app to:

1. search Small business assist to find information on a range of topics and videos, and to book an after-hours call back with a small business specialist
2. work out if a worker is an employee or a contractor for tax and super purposes
3. work out how much tax to withhold from your employees and other workers' pays
4. see how a payment plan can help you to quickly pay off a tax debt.

The ATO app can be downloaded through Google play™, Apple App Store and Windows Phone Store.
 






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What Will 2014 Bring?

There is still a lot of uncertainty in business circles all around Australia, as to what is going to happen during 2014.  Unfortunately, we will probably not know the key political decisions of the Abbott government, until the Federal Budget is delivered in May 2014.  On the bright side, it appears that the Chinese market will continue to perform strongly and there will be continual growth throughout most of Asia.

At its February 2014 meeting, the Reserve Bank decided to keep interest rates at 2.5%, and the general expectations are that interest rates will not go any lower and will start to rise later in the year.

The Personal Property Securities Act (PPSA) has become fully operational from the 31st January 2014.  Unfortunately, there were very little official promotions or education programs for SME businesses on how the Personal Property Securities Register (PPSR) will operate.  This has already proved very costly for some businesses, which have lost out in court cases, mainly against liquidators and receivers.  In this issue, we have included two articles on the PPSR.  If you are uncertain of what impact could this new legislation make on your business, please contact your commercial solicitor or ourselves, so that a full review can be undertaken of your circumstances, and appropriate system can be developed, to assist you in the decisions that will need to be made on whether to register a security interest on the PPSR.

It is interesting to evaluate economists' forecast on what might occur in 2014.  In summary, economists are arguing that the government should substantially increase the GST charge to around 18%, as a means of reducing the government's deficit.  It will be interesting to see what happens in the May 2014 Budget.

Economic Forecast for 2014 calendar year focuses around the following:
•    Real economic growth – 3.2%
•    CPI growth and inflation – 2.9%
•    Federal budget deficit to be around $30B
•    Reserve Bank of Australia Cash Rate – 3%
•    Exchange rate – US$/AUS$ around .85c

As always, cashflow management will be very important.  This includes the monitoring of debtors, stock, work in progress and abiding by bank governance on any loans or financing which have been negotiated with banks and other financial institutions. 
 
Now is a great time to be preparing business plans and budgets for 2014.  If you would like our assistance on any aspect of your business deliberation, please do not hesitate to contact us.


PPSR – Now Fully Operational 

The Personal Property Securities Act (PPSA) became fully operational from the 31st January 2014.  This means that the Personal Property Securities Register (PPSR) is now fully operational.

The PPSA allows a 'security interest' in personal property to be registered and searched by anyone at any time.  'Personal property' applies to everything, except land and buildings.  Whilst there is no compulsion to register any asset with the PPSR, if you don't register assets to which the legislation has deemed a requirement, you could end up losing those assets (even though you paid for those assets) to someone else who has a superior claim to you, because they have registered in accordance with the PPSA.  That business will then be lawfully able to sell the asset for which you have paid and utilise proceeds, as contribution towards payments to secured creditors.

Virtually every business will be affected by this legislation.  If you have not seen your commercial solicitor for advice on your 'Terms of Trade' and the 'Retention of Title' clauses ('Romalpa Clauses') included within your tax invoices, there is a strong possibility that you are not complying with the PPSA legislation.  As your accountants, we are able to assist you in implementing appropriate systems for the management of transactions that should be considered for registering the security interests on the PPSR.

There have been major legal decisions, which have cost people, who thought they owned the assets but had not registered on the PPSR during the two-year transitional period.  To their utmost dismay, they have found that the law didn't recognise their ownership.  In the case of WOW Sight & Sound, the business went into financial difficulties and many of the suppliers, who had supplied stock and consignment stock to WOW Sight & Sound stores, did not register their interest in the stock they supplied with the Personal Property Securities Register.  The liquidator was able to register the stock items that were in the premises at the time of their appointment, thus the 'owners' of the stock did not have a priority.  As a result, the suppliers lost a large amount of money.

In the QES case, QES placed plant and equipment on someone else's property, which went into liquidation.  QES did not register their security interest on the PPSR, and the liquidator was able to claim that plant and equipment, and sell it for the benefit of the secured creditor.

In the Kentor Minerals case, a business supplied a tank worth $300,000 to Kentor Minerals, which then went into liquidation.  The owner of the tank did not register their security interest on the PPSR, and they were unable to claim a priority on the tank.  The liquidator was able to sell the tank for the benefit of the secured creditor.

This legislation is very important; if you have any questions as to how the legislation operations might affect your business, please do not hesitate to contact us.   
Some of the Businesses Affected by PPSA

The Personal Property Securities Act (PPSA) will affect a wide range of businesses.  Some of the key issues businesses which have transaction that could be registered on the PPSR include:
•    retention of title clauses ('Romalpa Clause');
•    Terms of Trade – both of these documents should be drafted by a commercial solicitor, who will ensure they comply with the PPSA;
•    businesses operating in leased premises should seek legal advice on registering a security interest over plant, equipment, furniture, stock etc., that is situated on the leased premises; and
•    another potential problem is preferential payments that may have been paid to your business.  To protect yourself, you will need to seek legal advice on your Terms of Trade documents and the lodgement of a security interest on the PPSR.
Some of the businesses, which will be affected by the PPSA, include:
•    restaurants, shops, offices, warehouses that are being leased from their owners;
•    retail shop – retention of title clauses for credit sales;
•    trades and sub-contractors – registration of security interests on tools, equipment, vehicle and machinery left on a third party workplace - gaining access to leased premises to retrieve tools, equipment, vehicles etc;
•    risk of preferential payment claim by a liquidator, relative to leasing of furniture, fittings, equipment etc., that has been supplied to a third party e.g. a builder;
•    wholesaler supplier – retention of title clause and registration of security interests for stock sold and not yet paid for and consignment stock;
•    horses and other livestock that have been leased to a third party - registration of your security interest;
•    farmers – crops – registration of a security interest in farm produce stored on someone else's premises; and
•    equipment renters – registration of security interest.

In addition, other businesses will need to consider the PPSA legislation include:
•    motor vehicle dealers;   
•    ingredient suppliers;
•    water craft including boat owners;   
•    artists for paintings and other works of art;
•    livestock on agistment;   
•    equipment such as harvesting equipment stored at someone else's property;
•    share farmers;   
•    designers;
•    automotive spare parts suppliers;   
•    second hand motor vehicle dealers; and
•    prawn brokers;   
•    second hand dealers.

The type of transactions potentially effected by PPSA include:
•    businesses buying assets – check the PPSR to see if there is any encumbrances on the asset you are proposing to purchase;   
•    service entity arrangements
•    leasing goods – the legislation has introduced the term PPS Lease;
•    leaving property at someone else's premises; and
•    supplying goods on credit;   
•    dealing with your business' intellectual property.
•    consignment stock;    

The PPSA represents a very large change in commercial law, with some people claiming it is the biggest change in the last 200 years.  If you have any concerns on your business transactions and how they might relate to the PPSA legislation, our recommendation is that you consult your commercial solicitor for advice on Retention of Title clauses and Terms and Conditions of Trade.  Please contact us for a discussion relative to the implementation of an appropriate system, for the PPSR, for your business.

Article provided by http://www.ESSBIZTOOLS.com.au.