Understanding trusts when it comes to the PPSA
The PPSA can be confusing, particularly where trading trusts are involved. We’re often asked ‘how do you create a Secured Party Group involving a trust’ and ‘how do you perform PPS registrations over a trust’?
The answer is simple:
- Include both the Trust and the Trustee as Secured Parties within the one Secured Party Group
- Include both the Trust and the Trustee as Grantors within the one PPS registration.
Let’s ‘backup’ a little. A typical trading trust structure includes a Trustee, Trust and a business name and looks like this:
- ABC Pty Ltd as Trustee for
- The Jones Family Trust trading as
- Australian Auto Parts
On some occasions, the Trustee might be an individual person rather than a company.
We have some simple ‘rules of thumb’ where your customer is a trust:
- You must perform your PPS registrations against the Trust, using its ABN as the identifier,
- You should include in the same PPS registration, as an additional Grantor, the Trustee:
- Using its ACN where it is a corporate Trustee
- Or using the Trustees full name and date of birth if the Trustee is an individual
Of course, a failure to correctly identify your customer will invalidate your PPS registration, a very good reason to get it right.
The difficulty is in identifying situations where you’re dealing with a trust. Ideally, your credit application asks sufficient questions to identify the existences of a trust as well as the identity of both Trust and Trustee.
Unfortunately, there is no database of businesses acting as Trustees and even the person completing your credit application might not be aware of their own corporate structure.
And just to add more confusion, a search of a Trust’s ABN on ABN Lookup, will result in the name of the Trust being referred to as ‘The Trustee for the Jones Family Trust’ but it’s not the Trustee, it’s the Trust.
Whilst a search of the Trustee by reference to its ACN will not indicate it acts in a Trustee capacity.
Unfortunately, the onus is on you to correctly and completely identify your customer and to ensure you correctly perform your PPS registration.
If you have any PPSA concerns or queries, we are here to deal with them. At the end of the day, if you are registering security interests, it makes sense to ensure you are doing them correctly.
* The advice and comments contained in this article are general in nature and do not replace your own legal advice. The article should not to be construed as legal advice and you should obtain your own, independent legal advice before taking any action.
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About the author
Simon Read is a chartered accountant with over 30-years experience in insolvency and more than 7 years specialising in the PPSA. He has been advising on the PPSA with PPSAdvisory since 2010 and has helped hundreds of Australian businesses reach compliance. Simon loves the PPSA and truly understands tha practical implications for your business. He has hands-on experience in many industries including retail, manufacturing, equipment sales and hires, construction, mining, forestry and agriculture.
