Buying Plant and Equipment in Australia: A Complete Legal Guide

New Versus Used Plant

The first decision in any plant acquisition is whether to buy new or used. The choice is rarely just about price — it drives the entire legal and commercial position.

Buying new from an authorised dealer or manufacturer normally gives the buyer the benefit of a full manufacturer warranty, certified compliance with current Australian Standards and OHS regulations, documented service intervals, predictable depreciation, access to genuine spare parts and consumables, and the ability to claim the statutory consumer guarantees and merchantability warranties without argument. New equipment is also straightforward to finance — banks and specialist financiers will lend up to 100% of cost on sound equipment to a sound borrower, often on standard chattel mortgage or finance lease terms.

Buying used is a different transaction entirely. The equipment is sold in its actual condition, usually with all warranties (express, implied and statutory to the extent permitted by law) excluded. The service history may be incomplete or fabricated. The equipment may not comply with current Standards (it may have complied when manufactured, but Standards move). It may be subject to existing PPSR registrations, outstanding finance, leases, retention-of-title claims by parts suppliers, or even unresolved manufacturer recall notices. The depreciation profile is harder to predict. Financing is available but at higher rates, with shorter terms and tighter covenants.

Neither choice is wrong. A well-bought used machine can return capital faster than new. A poorly-bought new machine can become a stranded asset. The legal and due diligence work should be calibrated to the choice — used equipment needs significantly more pre-purchase investigation than new.

Asset Purchase Versus Share Purchase

Where plant and equipment is being acquired as part of a broader business transaction, the structural choice is between an asset purchase (the buyer takes selected assets — including the plant — out of the seller's company) and a share purchase (the buyer acquires the shares in the company that owns the plant). The detailed analysis is in our companion guide, Share Sale vs Asset Sale in Australia: Key Legal Differences.

For plant and equipment specifically, the key consequence is the treatment of existing security interests. On a share purchase, the existing PPSR registrations against the company continue — the buyer must verify in due diligence that no item of plant is encumbered beyond what is disclosed, and that disclosed encumbrances are appropriately addressed (paid out at settlement, novated, or expressly assumed). On an asset purchase, every PPSR registration against the seller covering the plant must be released at settlement — otherwise the buyer takes the asset subject to the secured creditor's interest.

Asset purchases are simpler from a security-clearance perspective: the buyer simply requires release of every registration recorded against the plant before settlement funds change hands. Share purchases require more careful mapping of what is registered, why, and whether it is consistent with the disclosed financing arrangements.

PPSR Searches

The Personal Property Securities Register, established under the Personal Property Securities Act 2009 (Cth) (the PPSA), is the single national register of security interests in personal property (defined broadly to mean everything except land). See our companion guide: PPSR Explained.

A buyer who takes plant and equipment without searching the PPSR can find — sometimes weeks or months after payment — that the equipment is subject to a registered security interest in favour of a third party. The secured creditor has, in many cases, a statutory right to take possession of the equipment from the buyer's premises and sell it. The buyer's only recourse is then against the seller, who may be insolvent, uncontactable or judgment-proof.

Before any plant and equipment purchase the buyer should conduct at a minimum:

• Grantor searches — a search against the seller's full legal name and ACN/ABN, and against any previous owner if the equipment was acquired recently.
• Serial-number searches — a search by VIN, chassis number, engine number, hull identification number, aircraft registration, or other regulated serial number for every item that has one. This is the critical search for motor vehicles, trailers, watercraft and aircraft.
• Asset-specific searches — where the equipment is known to have been financed by a particular party, a direct search against that party as secured party.

Each search costs only a few dollars. The cost of failing to search them can be the entire purchase price.

Existing Security Interests

Where a PPSR search reveals an existing registration over the equipment, the buyer has three practical options:

1. Require a release at settlement — the standard approach. The seller arranges for the secured party to register a discharge or partial discharge of its interest on the PPSR at settlement, with settlement funds paid (or directed) to the secured party in exchange for the release. The release must occur before the buyer takes possession of the asset.
2. Buy subject to the security interest — uncommon, but legitimate, where the buyer wishes to assume the underlying financing on agreed terms (typically by novation of the finance contract or by the buyer taking a new facility with the same financier). The buyer needs to satisfy itself the assumed financing is acceptable and the financier has agreed to substitute the buyer for the seller as obligor.
3. Walk away — if the encumbrance cannot be cleanly resolved or the underlying obligation exceeds the equipment's value, the buyer should not proceed.

Settlement should be conditional on receipt of PPSR verification statements evidencing discharge of every registration to be released. Where settlement is effected through trust account undertakings, the undertakings should specifically address PPSR discharge timing.

Equipment Finance — Overview

Few buyers pay cash for major plant. The principal financing options in the Australian market are finance leases, chattel mortgages and hire purchase, each with a different legal structure, tax outcome and risk profile.

Finance Leases

A finance lease is an arrangement under which a financier purchases the equipment and leases it to the user (lessee) for substantially the whole of the equipment's economic life. The lessee makes periodic rental payments; at the end of the term the lessee may purchase the equipment for a stipulated residual amount, extend the lease, or return the equipment.

The key features are: the financier remains the legal owner throughout the lease term; the lessee bears most of the risks and rewards of ownership; the lessee is responsible for maintenance, insurance, repairs, and risk of loss; the lessee's interest is recorded as a right-of-use asset and a corresponding lease liability on the balance sheet under AASB 16; the financier registers a security interest on the PPSR; and the lease usually includes financial covenants and default triggers (cross-default to the lessee's other facilities, change of control restrictions, financial ratio maintenance, prohibitions on disposal or relocation).

On a financial lease the lessee does not own the equipment, cannot grant security over it, cannot substantially modify it without consent, and is bound by return conditions at end of term (which can be expensive if the equipment is returned in less-than-pristine condition).

Chattel Mortgages

A chattel mortgage is a loan secured over goods. The buyer takes legal ownership of the equipment from settlement and grants the financier a mortgage over it. The mortgage is a PPSA security interest and the financier registers on the PPSR to protect priority.

Chattel mortgages are the dominant form of plant finance for Australian SMEs because they combine the tax advantages of ownership (depreciation, interest deductibility, GST input tax credits claimable in the quarter of purchase) with the cash-flow advantages of term debt financing. The buyer can sell or upgrade the equipment (subject to the mortgage being discharged or transferred), use it as collateral for other facilities (subject to priority and consent issues), and freely modify it.

The mortgage document should be reviewed carefully — standard mortgage terms typically contain extensive covenants, default triggers, cross-default clauses, and broad-form indemnities. The non-financial covenants often matter more than the interest rate.

Hire Purchase

Hire purchase is the historical hybrid: the buyer hires the equipment from the financier for a fixed term while making instalment payments, and ownership transfers to the buyer when the final payment is made. The buyer enjoys the benefit and risks of the equipment from delivery but does not legally own it until the end of the term.

Hire purchase has largely been replaced by chattel mortgages and finance leases in the Australian market following changes to the GST treatment in 2012 (under which a chattel mortgage allowed an immediate input tax credit on the full purchase price, while hire purchase spread the credit across instalments) and the AASB 16 lease accounting changes. It still appears in some specialist financing arrangements and in cross-border transactions.

Retention of Title Clauses

A retention-of-title clause (sometimes called a Romalpa clause after the leading English case Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 1 WLR 676) is a contract term under which the seller retains legal ownership of the goods until the buyer has paid in full. It is common in equipment supply, parts supply, raw materials supply and consumables supply.

Since the commencement of the PPSA in January 2012, retention-of-title clauses operate as PPSA security interests and must be perfected by registration on the PPSR to be enforceable against third parties on the buyer's insolvency. The registration must be made within strict statutory windows — generally 15 business days for inventory financed by a purchase money security interest (PMSI), 20 business days for non-inventory PMSIs — failing which priority is lost and the supplier ranks as an unsecured creditor.

For buyers, the consequence is that any equipment subject to a registered retention-of-title interest will appear on a PPSR grantor search against the seller, and the interest must be addressed at settlement (typically by payment of the outstanding sum to the title-retaining supplier in exchange for release).

Warranties

The warranty position is one of the most important commercial features of any plant and equipment contract and one of the most heavily negotiated.

Warranties on a typical new equipment contract include:

• Express contractual warranties from the seller — that the equipment is new, complies with the stated specifications, is free from defects in materials and workmanship, complies with applicable Australian Standards, will perform to documented performance criteria, is free from third-party claims and security interests, and that the seller has the right to sell.
• Manufacturer's express warranty — typically separate from the contract, running direct from the manufacturer to the end user for a defined period covering parts and labour. Conditional on registration, use of authorised service centres, genuine parts and consumables, and adherence to service intervals.
• Statutory consumer guarantees under Part 3-2, Division 1 of the Australian Consumer Law (Schedule 2 to the Competition and Consumer Act 2010 (Cth)) — acceptable quality, fitness for purpose, correspondence with description, supply by sample. These cannot be excluded for "consumer" transactions (which includes most plant under $100,000 and certain ordinary commercial plant above that figure).
• Sale of Goods Act warranties under the Sale of Goods Act 1958 (Vic) — quiet possession, free from encumbrance, correspondence with description and sample, merchantable quality and fitness for purpose. Excludable in B2B transactions outside the consumer guarantee regime.

On used equipment, the position is normally inverted: the contract excludes all warranties (express, implied and statutory to the extent permitted by law), and the buyer takes the equipment "as is, where is". The non-excludable statutory consumer guarantees may still apply where the equipment falls within the ACL's consumer-acquisition test, and certain Sale of Goods Act warranties may apply in consumer transactions. Outside those statutory floors, the buyer's only recourse is misrepresentation — and proving misrepresentation against a sophisticated commercial seller is difficult.

Due Diligence

Pre-purchase due diligence on plant and equipment is simpler than on a business as a whole but should not be skipped. A practical due diligence checklist for any material equipment purchase:

• obtain and inspect the seller's asset register entry for the equipment;
• obtain the service records, operating-hour logs, fault history and parts replacement history;
• conduct a PPSR grantor search against the seller and a serial-number search against every registrable component;
• verify the seller's right to sell (production of original purchase invoice, finance documentation, lease termination evidence);
• arrange independent inspection by a qualified engineer, mechanic or appropriate expert;
• review Australian Standards compliance and OHS guarding/registration status;
• obtain manufacturer confirmation that recall notices and safety bulletins have been addressed;
• review any existing maintenance, service or extended warranty contracts and confirm whether they transfer to the buyer;
• review insurance claims history involving the equipment;
• for imported equipment, confirm customs and importation compliance and parts availability in Australia; and
• obtain operating manuals, parts books, schematics, software licences and access credentials.

Asset Registers and Serial-Number Searches

The seller's asset register is the single most useful document in a portfolio plant and equipment acquisition. A well-maintained register lists, for every item: description, manufacturer, model, serial number, location, date of acquisition, original cost, depreciation method, written-down value, financing arrangements, warranty status and service history. It is the starting point for the PPSR searches, the warranty schedule, the bill of sale, the purchase-price allocation for tax and stamp duty, and the post-completion insurance and maintenance arrangements.

Where the register is incomplete or absent (common in owner-operated businesses), the buyer's lawyer and accountant should require the seller to reconstruct it from primary records (invoices, finance contracts, asset tags) before settlement — otherwise the buyer cannot properly identify what is being acquired or run the PPSR searches that protect title.

Serial-number searches deserve specific attention. Under the PPSA and PPSR Regulations, certain classes of personal property (notably motor vehicles, trailers, watercraft, aircraft and intangibles such as certain investment instruments) may be — and in some cases must be — registered by reference to their serial number. A buyer who fails to search by serial number takes the asset subject to any registered security interest, even where the grantor search comes back clean. The PPSR online search permits both grantor and serial-number searches and both should be run for every material item.

GST

GST at 10% is payable on the supply of plant and equipment by a GST-registered seller in the course of its enterprise, unless an exemption applies. The two exemptions most relevant in this context are the going-concern exemption (where the equipment is supplied as part of a going concern under section 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth)) and the sale of second-hand goods between non-registered parties.

For a registered buyer acquiring equipment for a creditable purpose, the GST is normally recoverable as an input tax credit in the relevant Business Activity Statement period — which materially reduces the effective cost. The buyer should ensure the seller issues a valid tax invoice on or before settlement and that the contract contains a standard GST clause allocating responsibility for any GST adjustments.

On imported equipment, GST is payable at the border under the GST taxable importation rules and is normally recoverable as an input tax credit on subsequent inclusion in the BAS.

Depreciation — General Overview Only

This section is a general overview only and is not tax advice. The depreciation treatment of plant and equipment is governed by Division 40 of the Income Tax Assessment Act 1997 (Cth). The depreciating asset is written off over its effective life (either the Commissioner's safe-harbour life by industry, published in the latest Taxation Ruling, or the taxpayer's self-assessed life). Two methods are available — prime cost (straight line) and diminishing value (a multiple of prime cost) — and once chosen the method is fixed for that asset.

Small business entities (under the relevant aggregated turnover threshold) may access pooling rules and concessional immediate write-off arrangements (instant asset write-off, temporary full expensing, the small business pool) which change from year to year. The availability and thresholds of these concessions depend on the income year of acquisition, the business's aggregated turnover, the cost of the asset and whether it is first held and used (or installed ready for use) within the relevant period.

Tax disclaimer. This guide is general information only and is not tax advice. Australian tax law changes frequently. Application of GST, depreciation, capital allowances and small business concessions depends on the buyer's specific circumstances and the income year of acquisition. Obtain advice from a qualified tax adviser or accountant before relying on any tax outcome described here.

Delivery and Acceptance Testing

The contract should specify where delivery occurs, when, in what condition, with what documentation (operating manuals, parts books, calibration certificates, software licences, test results), and who pays for transport, rigging, craneage, customs and similar costs. The Incoterms (EXW, FCA, FOB, CIF, DAP, DDP and so on) provide a recognised vocabulary for allocating delivery cost and risk in international supply and are equally useful in domestic equipment contracts.

For anything more sophisticated than a stock item, acceptance testing should be a contractual entitlement. The contract should specify: the test protocol; the duration of the acceptance period; what constitutes acceptance (positive written notice from the buyer, or deemed acceptance after the period expires without rejection notice); the buyer's rights if the equipment fails the test (rectification, replacement, partial refund, full termination); and the point at which legal acceptance occurs (which often triggers the start of warranty periods, the release of performance retentions, and the final tranche of payment).

Risk Passing and Insurance

Risk of loss or damage passes when the contract says it passes — and for that reason every contract should expressly address risk. The Sale of Goods Act 1958 (Vic) default rule is that risk passes with property (title) at the time the contract is made for specific goods, but this is regularly displaced. A typical equipment contract provides that risk passes on delivery, that the seller bears risk in transit (unless the Incoterm is ex-works or equivalent), and that the buyer must hold appropriate insurance from delivery.

From the moment risk passes the buyer should hold:

• industrial special risks or property insurance to the replacement value of the equipment;
• public liability insurance covering any premises in which the equipment is to be operated;
• product liability insurance for goods produced using the equipment (where the manufacturing process introduces additional product risk);
• motor vehicle insurance and compulsory third party (CTP) for registrable plant; and
• marine insurance for goods in international or coastal transit (typically arranged through the seller under a CIF or CIP Incoterm).

Where financed, the financier's interest must be noted on the policies and certificates of currency provided before drawdown.

Installation Obligations

For equipment requiring site installation — anything from a CNC machine to a production line to an MRI scanner — installation should be addressed in detail in the contract. The contract should specify:

• the scope of the seller's installation services;
• the site preparation work the buyer must complete (foundations, power, water, ventilation, environmental control, network connectivity) and the deadline for that work;
• responsibility for permits, building approvals and planning consents;
• compliance with the buyer's site OHS rules and contractor management procedures;
• the installation timetable, with milestones and float;
• commissioning, testing and the trigger for acceptance testing;
• responsibility for damage to the buyer's premises caused during installation;
• remedies if installation is delayed (liquidated damages, extensions of time, termination rights) or defective; and
• the point at which the installation phase formally ends and the warranty period begins.

Where installation is the buyer's responsibility, the seller should be obliged to provide documentation, drawings, technical assistance, on-site support if requested and remote diagnostic support during commissioning.

Training

For non-trivial equipment, operator training should be included in the purchase price. The contract should specify who is trained, where, for how long, to what standard, and who provides the trainer. Training should cover safe operation, daily and periodic maintenance, fault diagnosis, emergency procedures and safety interlocks. For high-risk plant (cranes, forklifts, scissor lifts, pressure vessels, certain industrial machinery) operators must hold a high-risk work licence under the OHS regulations — formal accredited training is mandatory and cannot be substituted by manufacturer familiarisation.

Where operators turn over or the equipment is upgraded, ongoing training is needed. The contract may include refresher training, train-the-trainer arrangements, access to online training resources, or a discounted rate for additional training days.

Maintenance Agreements and Service Contracts

For complex plant a maintenance or service contract from the manufacturer or an authorised service provider is usually worthwhile. The benefits are access to qualified and trained technicians, guaranteed response times, predictable maintenance cost, preserved warranty entitlements (many manufacturer warranties are conditional on use of authorised servicing), and documented compliance with OHS regulations and Australian Standards.

A maintenance contract should address: the scope of services (preventative scheduled maintenance, corrective repairs on call-out, condition monitoring, calibration); inclusions and exclusions (parts inclusive or additional, consumables, lubricants, wear items); response times (on-site within X hours of a fault call); after-hours and weekend cover; the term and renewal mechanism; price escalation; performance KPIs and service-level rebates for non-performance; indemnities for downtime caused by the service provider; and termination rights, both for cause and for convenience.

Independent (non-manufacturer) service providers may offer cheaper rates but may compromise manufacturer warranty cover — the trade-off should be analysed before committing.

Spare Parts

Long-term spare parts availability is a material risk for specialist plant. The supply contract should require the seller (or manufacturer, by direct undertaking) to make spare parts available for a defined period — typically the expected service life of the equipment, or at minimum a 10 to 15 year horizon for capital plant — at fair commercial pricing.

The contract should also require the seller to notify the buyer if any part is to be discontinued, so the buyer can place a final-buy order and stockpile critical spares. For specialist or imported equipment, parts lead-times can run to months — the agreed inventory level, the location of stock (Australia versus overseas), and the supplier's restocking obligations should all be addressed.

Counterfeit parts are a growing issue across the Australian market. The contract should warrant that only genuine parts will be supplied, that all parts will comply with the original specifications, and that the seller will indemnify the buyer for loss caused by counterfeit or non-conforming parts.

Intellectual Property in Machinery and Software

Modern plant typically incorporates embedded firmware, control software (PLCs, HMI software, SCADA platforms), telematics and remote-monitoring platforms, proprietary data formats, and increasingly subscription-based cloud analytics. Buying the physical equipment does not automatically transfer ownership of the IP in the software — the buyer normally receives a licence to use the software with that equipment for its useful life.

The contract should clearly address:

• the scope of the software licence — use, reproduction, modification, transfer on resale, sub-licensing;
• the term — perpetual, or coterminous with the equipment, or subscription-based;
• what happens on upgrade or replacement — does the licence migrate?;
• ownership of data generated by the equipment (operating data, performance data, telematics data) and the seller's right to access, aggregate or commercialise it;
• access to data on termination of any subscription;
• any ongoing fees for telematics, monitoring, analytics, software updates or cybersecurity patches; and
• the right to repair — can the buyer or an independent service provider access the diagnostic software needed to repair the equipment, or is that locked to the manufacturer?

The "right to repair" issue is increasingly important in agriculture, transport and manufacturing — buyers should not assume the right exists and should negotiate it expressly.

Imported Equipment

Buying imported plant introduces a layer of additional issues:

• compliance with Australian Standards — international standards (ISO, EN, IEC, DIN) are not automatically equivalent and may not satisfy Australian regulatory or OHS requirements;
• customs and import duties, calculated under the Customs Tariff Act 1995 (Cth) and any applicable free trade agreement;
• GST at the border under the taxable importation rules;
• biosecurity clearance through the Department of Agriculture, Fisheries and Forestry for goods of biological origin or carrying biological material;
• Incoterms allocating risk and cost in transit;
• exchange-rate exposure — especially on staged payments;
• lead times measured in months;
• warranty support from overseas, which can be slow and impractical;
• parts availability in Australia and the seller's commitment to local stockholding;
• the practical ability to enforce contract terms against a foreign seller, including service of process, judgment recognition and asset location; and
• the choice of governing law and dispute resolution forum — preferably Australian law and arbitration under an institutional rule set with the seat in Australia or another reliable jurisdiction (Singapore, Hong Kong, London).

Where possible, buy imported plant through an Australian-based authorised distributor, which converts the transaction into a domestic contract with all the associated legal protections. Where direct importation is necessary, an Australian-law overlay contract with the distributor's local technical support arrangements is essential.

Occupational Health and Safety

Under the Occupational Health and Safety Act 2004 (Vic) (and equivalent legislation in other States and the model Work Health and Safety laws elsewhere) an employer must provide and maintain a safe working environment so far as is reasonably practicable. That includes safe plant. The duty extends to designers, manufacturers, importers and suppliers of plant under sections 30 to 32 of the Victorian Act and corresponding provisions elsewhere.

The buyer should obtain:

• operating and maintenance manuals;
• evidence of compliance with the relevant Australian Standards;
• risk assessments and residual risk warnings;
• guarding, interlocks and emergency stop documentation;
• training and licensing documentation for any high-risk plant;
• registration documentation (certain high-risk plant items — pressure vessels, cranes, lifts — require registration with WorkSafe Victoria or equivalent regulators); and
• safety data sheets for any hazardous substances used with the equipment.

Personal liability under OHS legislation extends to officers (directors, senior managers) of the equipment-acquiring business under the officer due diligence provisions. Documenting the safety side of an equipment purchase is not optional.

Australian Standards

Australian Standards, published by Standards Australia, set out technical and safety requirements for specific classes of plant. Notable Standards include:

• AS 4024 (machinery safety, including guarding);
• AS/NZS 1200 series (pressure equipment);
• AS 1418 series (cranes, hoists and winches);
• AS 2550 series (cranes, hoists and winches — safe use);
• AS 1657 (fixed platforms, walkways, stairways and ladders);
• AS/NZS 3000 (electrical wiring rules);
• AS/NZS 4801 / ISO 45001 (occupational health and safety management);
• industry-specific Standards (mining, food processing, healthcare, transport).

Many Standards are incorporated by reference into OHS regulations or other binding legislation and become legally mandatory. The contract should warrant compliance with applicable Standards as at the date of supply, and the buyer should retain compliance certificates. Standards are updated regularly — older equipment may not meet current Standards even if it complied when manufactured.

Product Liability

Under Part 3-5 of the Australian Consumer Law (Schedule 2 to the Competition and Consumer Act 2010 (Cth)) the manufacturer of defective goods (which includes the importer where the foreign manufacturer has no Australian presence) is strictly liable for personal injury, damage to other property, and consequential losses caused by the defect. The cause of action is statutory, runs direct to the injured party and does not require proof of negligence or contractual privity.

A buyer of equipment that injures employees, members of the public, or other property typically has a direct statutory claim against the manufacturer in addition to its rights against the seller under the contract and the statutory consumer guarantees. The contract should include indemnities allocating product liability risk between supplier and buyer, with the supplier bearing liability for design and manufacturing defects and the buyer bearing liability for operator error, unauthorised modification and failure to maintain.

Product liability insurance — held by both the manufacturer and the buyer — is essential. The buyer should obtain certificates of currency from the manufacturer and confirm the policy responds to claims in Australia.

Contract Drafting Issues

The most common drafting failures in equipment contracts are listed in the FAQ below. To call out the most significant:

• Inadequate specification — equipment described in general terms ("one CNC mill, second hand") with no model, serial number, specifications attached or performance criteria;
• No acceptance testing regime — payment falls due on delivery with no contractual mechanism to reject equipment that fails to meet specifications;
• Risk and insurance not addressed pre-delivery — buyer paying deposits without clarity on what happens if the equipment is destroyed in the seller's warehouse;
• Trading on a quote — buyer relying on a one-page quote with no underlying terms, leaving warranty, default, IP and dispute resolution all undefined;
• Silence on PPSR and retention of title — buyer assuming title transfers free of encumbrance when in fact the PPSA framework dominates the transaction;
• Uncapped warranties on the seller, fully excluded warranties on used — the position should be balanced, not extreme;
• Silence on embedded software IP — buyer assuming ownership of software it has only licensed;
• No spare parts and maintenance provision — buyer trapped on the seller's after-market pricing; and
• No dispute resolution mechanism — defaulting to court proceedings when an expert determination or staged mediation would resolve the issue faster and cheaper.

For a fuller treatment of contract drafting see our companion guide, Commercial Contracts in Australia: A Complete Legal Guide.

Default Remedies

The contract should define what constitutes a default by each party (typically: failure to deliver by a defined date, failure to pay, breach of warranty, insolvency, change of control), the cure period (notice of default plus a defined period to remedy), and the remedies available on uncured default.

For the buyer's default the typical remedies are: interest on overdue amounts, suspension of further performance, termination, retention of deposits and payments on account, repossession of equipment subject to retention of title or registered security interest, and a damages claim for the contract balance less mitigation. For the seller's default the buyer's remedies typically include: extensions of time, liquidated damages for late delivery, rectification or replacement obligations on warranty failure, payment withholding, termination and damages for non-conforming or non-delivery.

Repossession

Where the equipment is financed (lease, hire purchase, chattel mortgage with PPSR registration, or retention of title with PPSR registration), the financier has contractual default rights and, if its security interest is properly perfected on the PPSR, the statutory enforcement rights in Chapter 4 of the Personal Property Securities Act 2009 (Cth) — including the right to take possession of the collateral, sell it and apply the proceeds in reduction of the secured debt.

The PPSA enforcement regime is highly procedural — notices must be given in prescribed form within prescribed timeframes, sale must be conducted in a commercially reasonable manner, and accounts must be rendered after sale. Defaults are not the moment to improvise: the PPSA process must be followed precisely, and a buyer at the receiving end of a notice should obtain immediate legal advice.

For individuals and small business buyers below the contracting-out threshold (under section 115 of the PPSA), certain protections cannot be excluded by contract — notice rights, the right to redeem, and the requirement of commercial reasonableness in any sale.

Limitation of Liability

Limitation of liability clauses are common (and commercially appropriate) in equipment contracts. A typical clause caps the seller's aggregate liability at the purchase price or some multiple of it, excludes consequential and indirect loss, and excludes specific heads of loss (loss of profit, production, opportunity, data, reputation, business interruption).

These caps are subject to:

• the unfair contract terms regime under sections 23 to 28 of the Australian Consumer Law, which applies to standard-form contracts with consumers and small businesses (fewer than 100 employees or turnover under $10 million), and which since the 2023 reforms can void a clause and impose civil penalties up to the greater of $50 million, three times the benefit or 30% of adjusted turnover;
• the non-excludable statutory consumer guarantees under Part 3-2 of the ACL;
• public policy limits — a party cannot generally exclude liability for personal injury caused by its own negligence in trade or commerce in certain circumstances, or for breach of statutory duty under OHS law;
• fraud and wilful misconduct — the law will not enforce a clause purporting to exclude liability for fraud, and most contracts expressly carve these out.

From the buyer's side, the cap should be subject to negotiated carve-outs — typically including breach of confidentiality, IP infringement, breach of PPSR warranties, fraud, wilful default, and indemnities for personal injury and property damage caused by the equipment. From the seller's side, a balanced cap supported by adequate professional indemnity and product liability insurance is preferable to a fight in litigation about whether an exclusion clause stands.

Dispute Resolution

Equipment disputes are common — over specifications, performance, defects, delay, payment, warranty and maintenance. A well-drafted contract will channel disputes through a sensible mechanism rather than defaulting to litigation.

A typical staged mechanism:

1. good-faith negotiation between the nominated representatives of each party within a defined period;
2. escalation to senior executives if the representatives cannot resolve the dispute;
3. mediation under a recognised institutional process (Resolution Institute, ACICA, Australian Disputes Centre); and
4. arbitration (under the Commercial Arbitration Act 2011 (Vic) or the International Arbitration Act 1974 (Cth)) or, if arbitration is not preferred, exclusive jurisdiction in the Supreme Court of Victoria.

For technical equipment disputes (specifications, performance shortfalls, defect causation) an expert determination clause — under which an independent industry-qualified engineer or specialist determines the technical question on a binding basis — is often more efficient than mediation or arbitration. The expert determination clause should specify the appointing authority, the qualifications of the expert, the procedure (written submissions, site inspection, expert reports) and whether the determination is binding.

For our broader dispute-avoidance and pre-litigation framework see Resolving Business Disputes Before Court and Letter of Demand: What to Do.

How This Guide Connects to the Broader Cluster

Plant and equipment acquisitions sit at the centre of many other commercial transactions and should be read with the related Parke Lawyers cornerstone guides:

• Buying a Business in Victoria: A Complete Legal Guide — the broader transaction in which plant is often acquired.
• Commercial Contracts in Australia — the underlying contractual framework.
• PPSR Explained — the security interest framework that dominates equipment due diligence.
• Share Sale vs Asset Sale in Australia — the structural choice when plant is acquired as part of a business.
• Business Sale Agreements in Victoria — the document that allocates plant in an asset sale.
• Shareholders' Agreements in Australia — governance of company-owned plant.
• Business Valuation in Australia — valuation of plant within an enterprise.
• Business Succession Planning — transitioning plant on a succession event.
• Business Exit Strategy — exit planning involving capital plant.
• Resolving Business Disputes Before Court and Letter of Demand — when an equipment transaction goes wrong.

How Parke Lawyers Can Help

Parke Lawyers acts for Australian buyers, sellers, financiers and operators of capital plant and equipment. We advise on:

• pre-purchase contract review, PPSR searches and due diligence on new and used plant;
• negotiation and drafting of equipment supply, installation, commissioning, maintenance and software licensing contracts;
• structuring the acquisition — direct purchase, asset purchase within a business sale, share purchase, financed acquisition;
• finance documentation — chattel mortgages, finance leases, hire purchase, retention-of-title supply terms and PPSR registration;
• imported equipment, including governing law, Incoterms, customs and Australian-law overlay contracts;
• OHS and Australian Standards compliance from a contractual and corporate governance perspective;
• warranty, defect and performance disputes — including expert determination, mediation, arbitration and litigation; and
• repossession, default enforcement and PPSA Chapter 4 procedure.

See our service pages: Commercial & Business Law. Reviewed by Jim Parke, Lawyer & Chartered Accountant.

Frequently Asked Questions