Buying Plant and Equipment in Australia: A Complete Legal Guide

1. Choose the acquisition structure

The first question is how the equipment is being acquired. The possibilities include an outright purchase of specific goods, an equipment hire or operating lease, a finance lease, hire purchase, a chattel mortgage financing outright acquisition, retention-of-title supply, or acquisition as part of a business (either as an asset within a business sale agreement or by acquiring the shares or units in the entity that owns the plant).

Each structure has different consequences for legal title, PPSA security interests, existing finance and supplier terms that attach to the goods, allocation of operating risk, warranties, GST, motor-vehicle or land transfer duty where relevant, and income-tax and depreciation outcomes. Where the equipment is being acquired within a business sale, employee entitlements, leased premises, contracts and licences are governed by the business sale agreement rather than a simple sale of goods contract.

2. Contract formation and scope

A well-drafted equipment contract identifies the goods with precision — make, model, serial or VIN where applicable, year, hours, included accessories, software versions, manuals, spares and consumables, location and condition. It addresses delivery, freight and Incoterms for imported goods, installation, commissioning, acceptance testing, training, title, risk of loss, insurance, warranties, remedies and dispute resolution.

There is no universal rule that title or risk passes on payment, on delivery or on signature. The Sale of Goods Act 1958 (Vic) sets out default rules for the passing of property and risk (see ss 22–25) and implied conditions and warranties as to title, description, quality and fitness (ss 17–20), and permits variation of those defaults within the limits allowed by that Act, the Australian Consumer Law and other mandatory law. Whichever way the parties want title, risk and warranties to fall, the contract should say so expressly.

3. Ownership and third-party interests

Possession by a seller is not proof of ownership. Used equipment may be leased or hired from a financier, subject to a chattel mortgage or subject to a supplier's retention of title. Diligence should establish that the seller has authority to sell and that any third-party interest is either released before settlement or dealt with under the contract.

Where a third-party interest exists, address it directly with the interest-holder — obtain documentary confirmation of the payout figure and the specific collateral to be released, and make settlement funds and release conditional on each other. A promise from the seller to "clear" an interest is not sufficient.

4. Personal Property Securities Register

The Personal Property Securities Act 2009 (Cth) governs security interests in personal property and establishes the Personal Property Securities Register (PPSR). A secured party perfects a security interest by registration (or in some cases possession or control), with priority rules and taking-free rules that determine when a buyer takes free of an interest.

Diligence should include searches appropriate to the transaction, which may include a grantor search against the seller by exact legal name or ACN/ABN, and a serial-number search against each item that is serial-numbered goods under the PPS Regulations (motor vehicles, trailers, watercraft, aircraft and certain other classes). The PPSA distinguishes serial-numbered goods and different collateral classes; the practical search set depends on the equipment.

A PPSR search does not prove title or reveal every interest. Registrations may be incorrectly described, unperfected, ineffective, or the collateral description may not match. The extinguishment and taking-free rules in Part 2.5 (for example ss 43–47 concerning serial number and consumer goods dealings) are technical and fact-specific — a buyer should not assume any particular outcome without legal advice on the specific transaction.

5. Australian Consumer Law and warranties

The Australian Consumer Law (Schedule 2 to the Competition and Consumer Act 2010 (Cth)) contains consumer guarantees (Part 3-2 Division 1) that cannot be excluded, restricted or modified. Whether they apply depends on whether the acquirer is a "consumer" under s 3 ACL — which turns on the current monetary threshold in s 3(1)(a) (currently $100,000, subject to legislated change), whether the goods are of a kind ordinarily acquired for personal, domestic or household use, and whether s 3(2) exclusions apply (acquisitions for re-supply or for use in a process of production, manufacture or repair of other goods).

Manufacturer warranties, seller express warranties in the contract and ACL consumer guarantees are three separate regimes. Contractual exclusions and limitations cannot override non-excludable ACL rights where they apply but may operate in business-to-business transactions subject to unfair contract term controls in Part 2-3 ACL for standard-form contracts with consumers or small businesses. Section 64A ACL permits certain limitations of remedy for non-consumer goods.

The Sale of Goods Act 1958 (Vic) implies conditions and warranties as to title, description, merchantable quality and fitness for purpose (subject to the terms of that Act) and permits variation to the extent that Act and other mandatory law allow. It is Victorian legislation; other jurisdictions have their own equivalents.

"As is, where is" language reallocates condition risk within lawful limits. It does not prove the seller has title or authority to sell, does not discharge non-excludable ACL rights and does not itself demonstrate that the goods are safe or fit for use.

6. Due diligence on used equipment

The scope of due diligence depends on value and use, but a reasonable programme for significant used equipment typically includes:

• identification (make, model, year, serial or VIN, engine number and any regulated identifier), and cross-checking against manufacturer records where available;
• service and maintenance records, hours, prior damage and repairs, recall status and safety bulletins;
• PPSA searches appropriate to the equipment (grantor and, where applicable, serial-number);
• independent inspection by a suitably qualified engineer, mechanic or specialist — an inspection reduces but does not eliminate the risk of latent defects;
• calibration, software versions, embedded firmware and telematics subscriptions;
• road registration and roadworthiness where the plant is registrable;
• availability of spare parts, consumables and authorised service;
• any intellectual property or software licence terms attaching to the equipment; and
• where the equipment is imported or was imported, customs, biosecurity and standards compliance history.

7. Safety and OHS in Victoria

In Victoria, workplace safety is governed by the Occupational Health and Safety Act 2004 (Vic) and the current Occupational Health and Safety Regulations. Victoria has not adopted the model Work Health and Safety Act — do not treat Commonwealth model WHS provisions as Victorian law. The OHS Act imposes duties on employers, self-employed persons, persons with management or control of workplaces and (relevantly to buying plant) designers, manufacturers, importers and suppliers of plant.

Certain classes of plant require design registration and item registration with WorkSafe Victoria under the OHS Regulations. High-risk work licensing applies to specified operations (for example some crane and forklift operation). Hazardous chemicals, electrical safety, guarding, isolation and emergency stop requirements may all apply depending on the equipment. Compliance is not established by purchase alone — the operator must assess risk in its own context, install and maintain controls, retain operating and maintenance manuals and keep records of inspection, testing and maintenance.

8. Delivery, risk, insurance and acceptance

The contract should set out where and when delivery occurs, who bears freight and insurance in transit, the point at which risk of loss and damage passes to the buyer, and how insurance is arranged from that point. For imported goods, the parties should choose the appropriate Incoterms rule to allocate transport, risk and cost, and address customs clearance and GST on importation.

Acceptance testing sets out the protocol for confirming the goods meet the specification, the duration of the testing period, what counts as acceptance (positive notice or deemed acceptance after a period), the remedies for failure (rectification, replacement, price reduction or termination) and the point at which any final instalment falls due.

9. Installation, training and maintenance

Where the seller is responsible for installation or commissioning, the contract should identify the scope, site preparation and utilities to be provided by the buyer, timetable, site OHS rules, permits, testing and handover. Where training is included, the contract should identify who is trained, over what period, to what standard, and any refresher or train-the-trainer options. For high-risk plant, statutory licensing may require formal certified training before use.

Ongoing maintenance and service arrangements should address scope, response times, parts inclusions, preventative versus corrective work, price escalation and interaction with any manufacturer warranty conditions. Using non-authorised service providers or non-genuine parts may affect warranty entitlements.

10. Embedded software and telematics

Modern plant often contains embedded firmware, control software, telematics platforms and data services. Buying the physical equipment does not automatically transfer ownership of that intellectual property. The buyer typically receives a licence to use the software with that equipment on defined terms. The contract should identify licence scope, whether the licence transfers on resale, upgrade and replacement rules, subscription fees and ownership of and access to data generated by the equipment, particularly on termination.

11. Imported equipment

Imported plant introduces customs and border clearance obligations under the Customs Act 1901 (Cth) and biosecurity clearance under the Biosecurity Act 2015 (Cth) where relevant. Electrical, radiocommunications and other regulatory approvals may apply. Australian Standards compliance is not automatically established by overseas standards. Sanctions and export controls may apply depending on the country of origin, end use and counterparties. The contract should address governing law, dispute resolution forum, warranty support in Australia and enforcement in the country of the seller.

12. GST, duty and tax

GST liability depends on whether the supply is a taxable supply under the A New Tax System (Goods and Services Tax) Act 1999 (Cth) — broadly, a supply made for consideration in the course of an enterprise by a supplier registered or required to be registered — and on whether any GST-free or input-taxed treatment applies. Where the sale is of a going concern under s 38-325, all statutory conditions must be met (registration of both parties, written agreement that the supply is of a going concern, supply of all things necessary for continued operation and continued operation until the day of the supply).

Motor vehicle duty under Chapter 9 of the Duties Act 2000 (Vic) may apply to registration transfers. Land transfer duty is not payable on chattels except where they form part of a dutiable transaction over land. Any calculation should be checked against current SRO material.

Income-tax and depreciation outcomes — including allocation of purchase price to depreciating assets, the application of Division 40 of the Income Tax Assessment Act 1997 (Cth), any current temporary write-off or small-business concessions in force at the time of acquisition, capital allowances, GST credits and CGT consequences — depend on the specific facts and current law. Do not rely on generic figures or on rules that were in force in earlier periods. Obtain accounting and tax advice from a qualified adviser.

13. Business sale context

Where equipment is acquired as part of a business, the asset schedule to the business sale agreement should identify the plant, its condition, its financing status and any assigned or novated finance, lease, warranty, software or maintenance agreements. Employee, tax and other business liabilities do not automatically attach merely because equipment is acquired — the treatment depends on the transaction structure and the sale agreement.

14. Insolvency and distressed sales

Acquisitions from an external administrator, receiver, liquidator or trustee in bankruptcy raise distinct issues — the authority of the office-holder to sell, the limited or "no warranty" basis on which they typically sell, disclaimer rights, potentially voidable transaction claims by later liquidators, priorities between competing secured parties and PPSA vesting on insolvency for unperfected security interests under s 267. Do not assume an administrator sale delivers clean title. Take legal advice specific to the insolvency framework involved.

15. Limitation of liability and dispute resolution

Limitation of liability, indemnities and caps in commercial contracts must be drafted with attention to the unfair contract terms regime in Part 2-3 ACL for standard-form contracts with consumers and small businesses, non-excludable ACL guarantees, general law constraints and any specific statutory duties. Dispute resolution clauses should provide for staged negotiation, expert determination where technical issues predominate, mediation and, only then, arbitration or court proceedings, with a considered choice of governing law and forum.

Related reading

• PPSR Explained — how the PPSR works and what searches actually show.
• Commercial Contracts in Australia — formation, unfair contract terms and drafting essentials.
• Share Sale vs Asset Sale in Australia — the structural choice that decides what a buyer inherits.
• Business Sale Agreements in Victoria — documenting a business acquisition that includes 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 plant and equipment. We advise on:

• pre-purchase contract review, PPSA diligence and clearance on new and used plant;
• negotiation and drafting of equipment supply, installation, commissioning, maintenance and software licence contracts;
• structuring the acquisition — direct purchase, asset purchase within a business sale, share purchase, or financed acquisition;
• finance documentation — chattel mortgages, finance leases, hire purchase and retention-of-title supply terms, and associated PPSA registrations;
• 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 — expert determination, mediation, arbitration and litigation; and
• enforcement, repossession and PPSA Chapter 4 procedure.

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

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