What is a hard asset?

The category is broad: manufacturing lines, ovens and mixers; delivery vans, utes, trucks and forklifts; CNC machines, excavators and tractors; warehouses, shelving and refrigeration. Tangible stock can count too, where it is pledged as security.

The type matters for the finance. Standard vehicles and common equipment have deep secondary markets and settled valuation methods, which is why equipment finance and a car loan are straightforward to arrange. Purpose-built plant is harder to value and slower to sell, so expect a more conservative structure and a longer remarketing window.

A lender takes a security interest over the asset and registers it on the Personal Property Securities Register. Perfecting that interest is what protects recovery if repayments stop. Clear identification matters: VIN or serial numbers, invoices and an agreed asset schedule head off arguments at the end of term.

Structure follows the asset. Under a finance lease the lessee carries most of the risks and rewards of ownership, while an operating lease leaves residual risk and title with the lessor and makes upgrading simpler. A novated lease handles employee vehicles through salary packaging. Match the term to the asset's working life.

The comparable market approach uses recent sales of similar items and works well for standard vehicles and widely traded equipment. Replacement cost estimates what a new equivalent would cost, which helps when sales evidence is thin, and depreciated replacement cost takes that figure down for age, condition and obsolescence. An earnings approach is rare for a single machine, and salvage value covers what is left at the end.

Independent certified valuers, brokers and specialist equipment valuers do the work, and lenders may use their own panel. Get a valuation at purchase, and where the exposure is large, revalue periodically to support reviews of the residual value and of insurance cover.

Hard assets sit in property, plant and equipment under AASB 116, and leases are accounted for under AASB 16, which puts nearly all leases on a lessee's balance sheet. The finance versus operating split now matters for lessor accounting, tax and commercial structuring rather than for a lessee's books. Depreciation spreads the cost over the useful life, using straight line, diminishing value or a usage-based method. The ATO sets effective life benchmarks and the rules for immediate write-offs, and vehicle claims need a logbook or equivalent records.

On the risk side, expect comprehensive insurance naming the lender as an interested party, plus maintenance covenants and limits on disposal or sub-leasing. Technological obsolescence can strip value from equipment faster than the schedule suggests, so keep service records and stay realistic about resale.