Employee entitlement schemes

This is Information Sheet 295 (INFO 295).

This information sheet (INFO 295) is for anyone who operates an employee entitlement scheme.

It contains an overview of our new approach to regulation of employee entitlement schemes under the Corporations Act 2001 (Corporations Act) that will apply from 1 April 2026, including details of transitional arrangements and guidance for operators on the process for applying for an Australian financial services (AFS) licence.

This information sheet explains:

• what is an employee entitlement scheme
• our new regulatory approach
• transitional arrangements for operators of employee entitlement schemes
• how to apply for an AFS licence with the relevant authorisations, and
• obligations that apply to operators of employee entitlement schemes under the Corporations Act and conditions of ASIC’s ongoing relief.

What is an employee entitlement scheme?

In summary, an employee entitlement scheme is a scheme to which employers may make, or are required by legislation, an award, or an agreement to make, contributions where the primary objective of the scheme is to fund benefits payable upon termination of employment, or long-service leave entitlements.

Overview of our new regulatory approach

Currently, operators of employee entitlement schemes have relief from the AFS licensing, managed investment and associated provisions of the Corporations Act under ASIC Corporations (Employee redundancy funds relief) Instrument 2015/1150 until 1 April 2026.

As announced by ASIC in November 2025, new regulatory arrangements will apply to employee entitlement schemes once the relief expires (ASIC announces approach to regulation of employee redundancy funds). From 1 April 2026, operators who wish to rely on our transitional relief will be subject to additional transparency and governance requirements (see ‘Transitional arrangements’ below).

These operators must apply for an AFS licence with relevant authorisations by 1 September 2026. If a person commences operating an employee entitlement scheme after this date, they must also apply for an AFS licence.

Ongoing relief from the managed investment, product disclosure and hawking provisions will be available to operators that obtain a licence with relevant authorisations. This relief is subject the conditions described in ‘What obligations are employee entitlement scheme operators subject to?’ below.

Our new relief instrument will be published in March 2026.

Schemes excluded from our new regulatory approach

Employee entitlement schemes established by or under a law of the Commonwealth, a State or a Territory (other than a general law allowing incorporation as a company or body corporate) are excluded from our new regulatory approach.

Also excluded from our new regulatory approach are the ‘new scheme’ as defined in the Construction Industry (Long Service) Act 1997 (Tas) and the ‘fund’ as defined in the Construction Industry Long Service Leave Act 1997 (Vic).

Excluded schemes will continue to be exempt from the AFS licensing, managed investment and associated provisions of the Corporations Act.

Transitional arrangements

Available transitional relief

Transitional arrangements will apply from 1 April 2026 until an operator obtains an AFS licence.

Under the transitional arrangements, an operator will continue to have relief from the licensing, managed investment and associated provisions of the Corporations Act but must comply with the conditions set out below.

Conduct obligations

You must (as operator of the scheme):

• perform your obligations honestly and with a reasonable degree of care and diligence
• ensure that property of the employee entitlement scheme is clearly identified as scheme property, held on trust for interest holders (‘members’) and held separately from your property and the property of other managed investment schemes
• treat members of the same class equally, and members of different classes fairly, and
• have in place adequate arrangements for the management of conflicts of interest and, if there is a conflict between the members’ interests and your own interests, prioritise the members’ interests.

Internal dispute resolution

You must have an internal dispute resolution system which provides for the handling of complaints made by members of the scheme. The guidance in Regulatory Guide 271 Internal dispute resolution (RG 271) may assist operators when designing and implementing their dispute resolution system (although operators are not required to comply with the requirements in RG 271 before they obtain an AFS licence).

Publishing information about the scheme

You must make information about the scheme publicly available on your website, including information about:

• how contributions to the scheme will be used
• how income derived, directly or indirectly, from contributions or other scheme property will be used
• the rights of members to receive payments from scheme property in relation to benefits payable upon termination of employment, long service leave entitlements, and other entitlements that are incidental to employment
• any significant risks associated with holding an interest in the scheme
• any rights that you have to be paid fees out of scheme property
• any agreements or arrangements under which a benefit may be given out of scheme property to you or your associate, and
• how complaints made by members of the scheme in relation to the operation of the scheme will be dealt with.

You are not required to prepare a Product Disclosure Statement (PDS) in relation to the scheme.

Notifying ASIC of reliance on the transitional relief

You must notify ASIC in writing of your reliance on the transitional relief within 14 days of first relying on the relief. For existing schemes, this means that you must notify ASIC by 15 April 2026.

You must notify ASIC by email at: ees.notifications@asic.gov.au. Your notification should include:

• the name of the employee entitlement scheme
• the name of the operator of the employee entitlement scheme, and
• the date on which you first relied on the transitional relief.

Timeline of the transitional arrangements

When	What relief is available
Before 1 April 2026	If you have notified ASIC that you are relying on the existing relief under ASIC Corporations (Employee redundancy funds relief) Instrument 2015/1150, you can continue to rely on this until 1 April 2026.
From 1 April 2026 until 1 September 2026	Transitional relief is available until 1 September 2026 subject to the conditions outlined above.
After 1 September 2026	If you submit your AFS licence application by no later than 1 September 2026, you can continue to rely on the transitional relief until ASIC makes a decision on your licence application. If you are granted a licence, you can then rely on ongoing relief from the managed investment, product disclosure and hawking provisions. This relief is subject to conditions (see ‘What obligations are employee entitlement scheme operators subject to?’ below). If you do not apply for your AFS licence by 1 September 2026, or you apply and ASIC refuses the application or you withdraw your application, you must cease operating the employee entitlement scheme because the provision of financial services will be in contravention of the Corporations Act.

Applying for an AFS licence

In order to apply for an AFS licence you must use ASIC’s Regulatory Portal. If you have not already done so, you need to create and register your portal account by following the prompts for ASIC Regulatory Portal registration.

For a guided tour on what you will need to provide to complete an AFS licence application, watch our step-by-step video on YouTube: Apply for an Australian financial services licence transaction.

For more information about applying for an AFS licence, see:

• Applying for and managing an AFS licence
• AFS licensee obligations
• Regulatory Guide 1 Applying for and varying an AFS licence (RG 1), and
• Information Sheet 294 FAQs: AFS licence applications (INFO 294).

What type of authorisations do you require?

When you apply for an AFS licence, you will be asked questions about the financial services you intend to offer. You will need to select the correct authorisations for all financial services and financial products that you intend to offer.

An employee entitlement scheme is a specific type of unregistered managed investment scheme. The appropriate authorisations in relation to operating an employee entitlement scheme will generally include some or all of the following financial services:

• provide general financial product advice for the following classes of financial products:
  • interests in managed investment schemes limited to employee entitlement schemes only*; and
• deal in a financial product by:
  • issuing, varying or disposing of a financial product in respect of the following classes of financial products:
    • interests in managed investment schemes limited to employee entitlement schemes only;* and
  • provide the following custodial or depository services:
    • operate custodial or depository services other than investor directed portfolios services.

You will need to select to provide the financial services to retail clients and if applicable, to wholesale clients. Further information about understanding your clients and whether a person is a retail or wholesale client is provided in RG 1 at RG 1.39 – RG 1.43.

* When completing your online licence application, as there is no existing category for employee entitlement schemes, you will need to select the authorisation to deal in, and to provide advice (if applicable) on, the financial product ‘managed investment schemes excluding investor directed portfolio (IDPS)’.

ASIC will then tailor the authorisation on any licence granted to ‘interests in managed investment schemes limited to employee entitlement schemes only’. This will ensure the licence accurately reflects the specific financial product that you are providing financial services in respect of.

What information you must provide

When you apply for an AFS licence, you need to provide information about your proposed financial services business including details about how you intend to operate your employee entitlement scheme.

Specifically, you will need to provide details about:

• the type of financial services and products you will provide
• how you will generate income from the financial services and products
• the proportion of your total income that you estimate each type of financial service and product will generate
• forecasts of your anticipated business growth
• whether you will provide services to retail and/or wholesale clients
• the distribution channels you will use to distribute your products
• how you will deliver those financial services and products to your clients
• whether your business will operate in Australia and/or other countries, and how you will supervise and monitor compliance with your licence obligations, and
• whether any financial service-related functions are outsourced, and if so, who will perform those functions, and in which locations.

The application will ask further questions based on the selections made in the application. For example, if you select the ‘custodial or depository services’ authorisation you will be asked additional questions about your proposed custody activities and any relevant custody agreements. See ASIC’s AFS licensing kit webpage and INFO 294 for further information about these questions.

Additionally, you will need to provide People Proofs for each ‘fit and proper person’ and nominated responsible manager(s). This is explained in more detail in Section C of RG 1.

Responsible managers

Before ASIC will grant you an AFS licence, you need to demonstrate that you have the competence to provide the financial services and products you are asking to be authorised for under your licence: see s912A(1)(e). We assess your ability to meet this competency obligation by looking at the knowledge and skills of the responsible managers you nominate in your application. We will assess each nominated responsible manager on a case-by-case basis.

The number of responsible managers you need to nominate will depend on the nature, scale and complexity of your business. However, we generally expect that an AFS licensee will have at least two responsible managers.

You should only nominate someone as a responsible manager if they are directly responsible for significant day-to-day decisions about the ongoing provision of financial services under your AFS licence. We expect that at least one of the responsible managers will have at least three years’ relevant experience in providing or supervising the financial services within an existing licensed environment (e.g. operating managed investment schemes). See Table 1 within Regulatory Guide 105 AFS licensing: Organisational competence (RG 105) for a snapshot of the five options for demonstrating knowledge and skills of responsible managers.

You may nominate one or more other responsible managers who have relevant industry experience providing or supervising services in relation to an employee entitlement scheme that has been operated relying on ASIC’s current relief.

Together, your responsible managers need to have knowledge and skills that demonstrate you can provide all of the financial services and products covered by your AFS licence. As employee entitlement schemes are a specific type of managed investment scheme, your nominated responsible managers need to have the knowledge and skills:

• in relation to advising (if applicable) and dealing in interests in a scheme
• covering the business activities of the scheme and financial products offered, and
• providing custodial or depository services (if applicable).

In your application, you should explain how the responsible manager’s knowledge and skills (i.e. their qualifications, training and experience) are relevant to employee entitlement schemes and their ability to meet the compliance obligations under an AFS licence. If there are no industry-specific courses for employee entitlement schemes, training relevant to managed investment schemes and assets held by the scheme may be appropriate.

Further information about what we look for when assessing organisational competence is set out in RG 105 and RG 1.180-186.

What obligations are employee entitlement scheme operators subject to?

Under our new regulatory approach, you must hold an AFS licence and comply with all your AFS licensee and other obligations. Some of the key obligations are listed below. More information about your obligations as an AFS licensee can be found at AFS licensee obligations.

AFS licensee obligations under the Corporations Act

Obligation	Description	Relevant guidance
General obligations: section 912A(1)(a), (b) and (c)	Act efficiently, honestly and fairly, and comply with the conditions on the licence and the financial services laws. This includes an obligation to notify ASIC of reportable situations (section 912DAA).	Regulatory Guide 104 AFS licensing: Meeting the general obligations (RG 104)
Conflicts of interest: section 912A(1)(aa)	Have in place adequate arrangements for the management of conflicts of interest.	Regulatory Guide 181 AFS licensing: Managing conflicts of interest (RG 181)
Resource requirements: section 912A(1)(d)	Have adequate financial, human and technological resources.	Regulatory Guide 166 AFS licensing: Financial requirements (RG 166) and Regulatory Guide 104 AFS licensing: Meeting the general obligations (RG 104)
Organisational competence: section 912A(1)(e)	Maintain the competence to provide the financial services.	RG 105 and RG 1
Risk management: section 912A(1)(h)	Have adequate risk management systems.	Regulatory Guide 104 AFS licensing: Meeting the general obligations (RG 104) and Regulatory Guide 259 Risk management systems of fund operators (RG 259)
Compensation arrangements: s912B	Have adequate compensation arrangements.	Regulatory Guide 126 Compensation and insurance arrangements for AFS licensees (RG 126)
Dispute resolution: section 912A(1)(g), (2) and (2A)	Have an internal dispute resolution system that meets ASIC’s standards and requirements. Be a member of the external dispute resolution scheme, Australian Financial Complaints Authority.* * Applicants should take steps to apply for membership as early as possible. Where AFCA membership is required, we will only issue you with an AFS licence if you are an AFCA member: see RG 1.235. Information about AFCA membership can be found at AFCA’s membership application page.	RG 271 Regulatory Guide 267 Oversight of the Australian Financial Complaints Authority (RG 267)
Financial reporting: section 989B	Prepare annual audited financial statements as a licensee (in addition to the annual company financial statements prepared under Chapter 2M).	Financial reporting and audit

Conditions of our ongoing relief

In addition to the general obligations on you as an AFS licensee, our new regulatory approach will impose specific obligations on you as an operator of an employee entitlement scheme as conditions of the ongoing relief that is available from the managed investment, product disclosure and hawking provisions.

The key conditions of relief will include:

Obligation	Description
Care and diligence	Perform your obligations as the operator of the employee entitlement scheme honestly and with a reasonable degree of care and diligence.
Holding scheme property	Ensure that property of the employee entitlement scheme is clearly identified as scheme property, held on trust for members and held separately from your property and the property of any other managed investment scheme.
Treatment of members	Treat members of the same class equally and members of different classes fairly.
Conflicts of interest	If there is a conflict between the members’ interests and your own interests, give priority to the members’ interests.
Publicly available information about the scheme	Make available on your website information about the scheme, including: · how contributions to the scheme will be used · how income derived, directly or indirectly, from contributions or other scheme property will be used · the rights of members to receive payments from scheme property in relation to benefits payable upon termination of employment, long service leave entitlements, and other entitlements that are incidental to employment · the availability and location of the scheme’s annual financial report and auditor’s report · any significant risks associated with holding an interest in the scheme · any rights of the operator to be paid fees out of scheme property · any agreements or arrangements under which a benefit may be given out of scheme property to you or your associate, and · how complaints made by members of the scheme in relation to the operation of the scheme will be dealt with.
Annual financial reporting	Prepare an annual financial report for the scheme, have the report audited, and make it publicly available on your website within three months after the end of the financial year.
Record keeping	Keep written financial records that: · correctly record and explain the employee entitlement scheme’s transactions and financial position and performance, and · enable true and fair financial statements for the scheme to be prepared and audited. These records must be retained for seven years.
Notifying ASIC of the schemes operated	Notify ASIC in writing of the name of any scheme operated while relying on the relief.

Related information

For further information regarding our new approach to regulating employee entitlement schemes see:

• ASIC announces approach to regulation of employee redundancy funds
• Consultation Paper 384 Employee redundancy funds (CP 384).