Off-Balance Sheet (OBS) Finance in Australia: 2025 Guide

Off-balance sheet (OBS) finance is more than just a technical accounting term—it’s a strategic lever for Australian businesses seeking capital flexibility without bloating their balance sheets. But in 2025, with new regulatory scrutiny and evolving financial reporting standards, understanding OBS is no longer optional. Here’s what every Australian business owner and finance professional needs to know.

What Is Off-Balance Sheet (OBS) Finance?

Off-balance sheet finance refers to assets, liabilities, or activities that do not appear directly on a company’s main balance sheet. Instead, these are disclosed in notes or subsidiary statements, often involving arrangements like leasing, joint ventures, or special purpose vehicles (SPVs). The main draw? OBS transactions can help businesses manage debt ratios and liquidity, giving them access to resources without impacting their reported leverage.

• Common OBS Examples: Operating leases, certain guarantees, factoring of receivables, and some types of joint ventures.
• Why Use OBS? To access funding, manage risk, or structure business partnerships without inflating balance sheet liabilities.

However, recent financial scandals and the global push for transparency have put OBS activities under the microscope, especially for larger or listed entities.

2025 Policy Updates: The New Face of OBS in Australia

The Australian Accounting Standards Board (AASB) and ASIC have tightened the rules in 2025, aligning local practices with global standards (notably IFRS 16 and 17) and introducing new disclosure requirements for large proprietary companies. Here’s what’s changed:

• Leases under AASB 16: Most leases now require on-balance sheet recognition, except for short-term or low-value leases. This dramatically reduces the scope for hiding large obligations via traditional operating leases.
• Enhanced Disclosure: Companies must now provide detailed notes on all material OBS arrangements, including their purpose, risks, and potential future liabilities.
• Regulatory Focus: ASIC has flagged OBS transactions as a surveillance priority for 2025, particularly for entities in property, infrastructure, and resources.

Example: A mid-sized logistics company previously kept $8 million in truck leases off its balance sheet. Under new rules, most of that debt is now front and centre, impacting loan covenants and investor perceptions.

Real-World Impacts: Risks, Rewards, and Red Flags

While OBS finance offers genuine advantages—such as flexibility and improved headline ratios—it comes with risks. The biggest? Misunderstanding or misusing these structures can trigger audit issues, regulatory penalties, or reputational fallout.

• For SMEs: OBS factoring and supplier financing can boost cash flow, but transparency is essential. Lenders and investors are increasingly scrutinising note disclosures and off-sheet exposures.
• For Large Corporates: Joint ventures and SPVs remain popular for infrastructure projects, but must be carefully structured to avoid running afoul of AASB or tax office guidelines.
• Red Flags: Complex, opaque arrangements; frequent use of non-standard SPVs; or inconsistent disclosures across periods.

In 2025, robust internal controls and proactive reporting are the best defence. Smart companies are investing in digital accounting tools and seeking independent audits of their OBS arrangements to stay ahead of regulatory expectations.

Best Practices for Australian Businesses in 2025

• Audit Your Arrangements: Regularly review all off-balance sheet exposures and ensure compliance with AASB 16 and 17.
• Update Stakeholders: Communicate changes in balance sheet presentation to lenders, investors, and key partners—especially if ratios or covenants will shift.
• Stay Transparent: Detailed, plain-English disclosures in financial statements can prevent misunderstandings and build trust with the market.

As 2025 unfolds, the line between on- and off-balance sheet is clearer—but the stakes are higher. OBS finance is still a valuable tool, but it demands diligence and openness in today’s environment.