Trust Receipts in Australia: 2025 Guide for Business Finance

Australian businesses that import goods or need to pay overseas suppliers often face a cash flow squeeze. Enter the trust receipt—a flexible, short-term finance tool that’s gaining traction in 2025’s evolving trade finance landscape. But what exactly is a trust receipt, how does it work, and what’s changing this year? Let’s break down everything you need to know about this unique instrument.

What Is a Trust Receipt?

A trust receipt is a legal document used in trade finance, most commonly by importers. It allows a business to take possession of goods from a bank (which has paid the supplier on their behalf), sell those goods, and then repay the bank once sales are made. Crucially, the bank retains ownership of the goods until the trust receipt is repaid. Think of it as a bridge between paying your supplier and collecting payment from your own customers.

• Importer receives goods, but the bank holds title until the loan is settled.
• Used to finance inventory—especially for businesses with long supply chains or delayed receivables.
• Term usually ranges from 30–180 days, aligning with the business’s sales cycle.

How Do Trust Receipts Work in Australia?

The process typically unfolds like this:

1. The business arranges a letter of credit or similar facility with their bank.
2. The supplier ships goods, and the bank pays the supplier upon receiving shipping documents.
3. The bank releases the goods to the importer under a trust receipt agreement, allowing the business to take possession and sell the goods.
4. Once the goods are sold (or at the end of the trust receipt term), the importer repays the bank, who then releases title fully.

This arrangement is particularly useful for importers of electronics, machinery, or bulk commodities, where the time between paying the supplier and receiving customer payment can be significant.

Legal Structure and Risks in 2025

Trust receipts are governed by the Personal Property Securities Act 2009 (Cth) (PPSA) and the Uniform Commercial Code for international transactions. In 2025, there are several policy updates impacting trust receipts:

• Enhanced Reporting Requirements: New APRA rules require more granular disclosure of trust receipt arrangements on balance sheets, with a focus on anti-money laundering and beneficial ownership transparency.
• Digital Documentation: Many banks now offer end-to-end digital trust receipt management, cutting down processing time and reducing risk of document fraud.
• Interest Rates and Credit Risk: With the RBA maintaining a tighter stance in early 2025, trust receipt rates have risen slightly, making it crucial to shop around for competitive terms.

It’s important to note that defaulting on a trust receipt can trigger immediate repossession of goods by the bank, along with potential legal consequences under the PPSA. Businesses must carefully manage their inventory turnover and sales projections when using this tool.

Real-World Example: Australian Importer Using Trust Receipts

Imagine a Melbourne-based auto parts distributor importing $500,000 of components from Japan. Their bank pays the supplier and releases the shipment under a 90-day trust receipt. The distributor sells the parts over two months, collects payment, and repays the bank. The trust receipt allows them to:

• Free up cash for other operations
• Take advantage of supplier discounts for upfront payment
• Align repayment with actual sales, not just shipment receipt

In 2025, this distributor would benefit from streamlined digital trust receipt platforms and the ability to track inventory in real-time, helping them stay compliant with new APRA transparency rules.

Trust Receipts vs. Other Trade Finance Tools

How do trust receipts compare to alternatives?

• Overdrafts: Trust receipts are purpose-specific and usually have lower interest rates than unsecured overdrafts.
• Invoice Finance: Invoice finance releases cash tied up in receivables, while trust receipts finance the goods before they’re sold.
• Letters of Credit: Often used together—letters of credit secure the supplier, while trust receipts help manage post-shipment cash flow.

Many Australian banks—including the Big Four and major international trade banks—offer trust receipt facilities as part of broader trade finance packages. In 2025, expect more fintech entrants to offer streamlined digital trust receipt options for SMEs.

Is a Trust Receipt Right for Your Business?

If you’re importing goods, have reliable sales channels, and need to smooth out cash flow between delivery and payment, a trust receipt could be a powerful solution. It’s essential, however, to fully understand the legal obligations and match the facility’s term to your sales cycle. With new compliance requirements and digital tools, 2025 is shaping up to be a pivotal year for trust receipts in Australia.