Employee entitlement schemes

Schemes covered by our instrument

Our instrument applies to employee entitlement schemes that:

• were established before 1 April 2026. This includes legacy schemes that are in continued operation but are closed to accepting any new contributions from members (known as ‘closed’ or ‘dormant’ schemes), and
• are established from 1 April 2026 onwards.

Schemes excluded from regulation under the Corporations Act

Under our instrument, 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 being a financial product for the purposes of Chapter 7 of the Corporations Act.

Also excluded from being a financial product 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).

Operators of these schemes will not be subject to the requirements of the Corporations Act.

Conduct obligations

You must (as operator of the scheme):

• act efficiently, honestly and fairly in operating the scheme
• perform your obligations 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
• 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, and
• keep written financial records about the scheme’s transactions, financial position and performance and that enable true and fair financial statements to be prepared and audited.

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
• the availability and location of annual financial reports and auditor’s reports for the scheme (see below)
• any significant risks associated with holding an interest in the scheme
• any rights to be paid fees out of scheme property that you or your ‘associates’ (as that term is defined in ASIC Instrument 2026/199) have
• 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. You are also not required to prepare a target market determination (TMD) or comply with the design and distribution obligations for interests in the scheme.

Financial reporting for the scheme

You must prepare audited annual financial reports for the scheme consistent with Chapter 2M of the Corporations Act from:

• 1 July 2026, or
• an earlier date you elect.

This means that this requirement will not apply to a financial year beginning before 1 July 2026, unless you elect an earlier financial year start date (for example, to maintain your current reporting period). Instead, an interim website disclosure obligation will apply for the period prior to 1 July 2026 (see ‘For periods prior to 1 July 2026’ below).

These reports must be made prominently available on your website within four months after the end of the financial year.

If you rely on the transitional relief on or before 30 June 2026, you must also publish in a prominent position on your website:

• a copy of the scheme’s balance sheet
• a profit and loss statement
• a cash flow statement, and
• any auditor’s report.

The period covered by the statements must be, if the scheme commenced operation:

• before 1 July 2025 – a period of at least 12 months ending on a date between 1 July 2025 and 30 June 2026, or
• after 1 July 2025 – the period from the date the scheme commenced operation until 30 June 2026.

These financial statements must be published as soon as practicable, and no later than:

• 1 May 2026, if the period covered by the statements ends before 1 January 2026, or
• four months after the end of the period to which the statements relate.

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.

You must notify us 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.

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.

Authorisations required to operate the employee entitlement scheme

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 the relevant authorisations 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.

Authorisation for other financial services and financial products proposed

In your application, you will also need to select any other financial services you seek to provide under your licence and the financial products those services relate to.

For example, in operating the employee entitlement scheme, you may invest in underlying financial products such as securities or interests in managed investment schemes. You may therefore require authorisation to provide advice on, or deal in, those financial products.

You may also seek to offer insurance products to members and may therefore require authorisation to provide advice on, or deal in, general or life insurance products.

Further information about selecting authorisations to provide financial services in relation to financial products is outlined in Section B of RG 1.

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.

AFS licensee obligations under the Corporations Act

AFS licence conditions

You must also comply with the conditions of your licence, including the following specific conditions relating to the operation of an employee entitlement scheme.

Conditions of our ongoing relief

In addition to the general obligations on you as an AFS licensee, our instrument imposes specific obligations on you as an operator of an employee entitlement scheme as conditions of the ongoing relief that is available.

The key conditions of relief will include: