ASIC’s new approach to employee entitlement schemes: transitional relief and AFS licensing

Insights23 Feb 2026

By Adrian Verdnik, Charlotte Pratt and Jonathan Taylor

Need to know

The Australian Securities and Investments Commission (ASIC) has introduced a new approach to regulating employee entitlement schemes.
Existing relief for scheme operators from the Australian financial services (AFS) licensing and managed investment provisions will expire on 1 April 2026.
ASIC will provide transitional relief from 1 April 2026 until 1 September 2026 provided certain conditions are met and is contingent on operators submitting an AFS licence application by 1 September 2026.
Once an AFS licence is granted, operators will have new obligations as licensees and may need to meet additional requirements.
Aspects of the relief regime require clarification which we hope ASIC will address in its new relief instrument scheduled for March 2026.
The HW Funds team can assist operators in navigating the new ASIC requirements, preparing AFS licence applications, and ensuring compliance with the transitional relief conditions.

Overview

ASIC has published Information Sheet 295 (INFO 295) outlining its new approach to regulating employee entitlement schemes, including transitional relief and the process for applying for an AFS licence. This follows ASIC’s 2025 industry consultation process under Consultation Paper 384, which investigated reforming existing relief under ASIC Corporations (Employee redundancy funds relief) Instrument 2015/1150 (ASIC Instrument).

While the relief currently provided under the ASIC Instrument to operators of employee entitlement schemes will expire on 1 April 2026, ASIC will provide transitional relief to operators from 1 April 2026 until 1 September 2026.

The transitional relief will continue to relieve operators from the licensing, managed investment and associated provisions of the Corporations Act, but they must comply with the conditions set out below. Note this relief is contingent on operators submitting an AFS licence application by 1 September 2026 (although operators can rely on the relief until ASIC determines the application).

Operators must notify ASIC in writing of their reliance on the transitional relief within 14 days of first relying on the relief. For existing schemes, this means operators must notify ASIC by 15 April 2026.

INFO 295 also provides some guidance on what operators of employee entitlement schemes will need to do after they obtain their AFS licence. They will have obligations as AFS licensees and will also need to meet certain conditions to be relieved from other obligations that might apply to their operation of the scheme (such as having to register the scheme with ASIC).

What’s required to rely on the transitional relief?

If you are an operator of an employee entitlement scheme you must satisfy the following conditions to rely on the transitional relief:

Condition	Requirements
Meet conduct obligations	Perform your obligations honestly and with a reasonable degree of care and diligence. Ensure 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.
Internal dispute resolution	Have an internal dispute resolution system that provides for the handling of complaints made by members of the scheme. Regulatory Guide 271 Internal dispute resolution may assist you when designing and implementing a dispute resolution system, although you will not be required to comply with this guide until you have an AFS licence.
Publishing information about the scheme	Publicise: 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 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. INFO 295 makes it clear there is no requirement to prepare a product disclosure statement ( PDS ) in relation to an employee entitlement scheme. However, it is unclear whether the transitional relief extends to the design and distribution obligations ( DDO ) regime contained in Part 7.8A of the Corporations Act. The requirement to prepare a target market determination ( TMD ) and comply with distribution requirements arises if a person is required to prepare a PDS or if the Corporations Regulations ( Regulations ) require it. ^[1] As INFO 295 states that providing a custodial or depository service (excluding IDPS) would ordinarily be an authorisation required to be held by the operator of the employee entitlement fund, and the Regulations require issuers of products that include a custodial or depository service to make a TMD for such a product, it appears operators may still be subject to DDO. Hopefully ASIC clarifies this issue soon.
Notifying ASIC of reliance on the transitional relief	Notify ASIC in writing of your reliance on the transitional relief within 14 days of first relying on the relief. For existing schemes, you must notify ASIC by 15 April 2026. A 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.

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 determines your licence application.

Operators who fail to apply for an AFS licence by 1 September 2026, or whose application is refused or withdrawn, must cease operating the scheme by this date to avoid contravening the Corporations Act.

Next steps

To implement the transitional relief, ASIC plans to publish its new relief instrument in March 2026. There are many aspects of the relief regime that require further clarification, including:

If a scheme has a separate trustee and administrator, who is the ‘operator’ of the scheme?
Do schemes closed to new members have to be licensed?
Are all the activities of an employee entitlement scheme (including its investment activities) covered by the relief that applies to ‘operation of the scheme’?
What is the consequence for scheme operators where there is minor immaterial breaches of the relief conditions (such as failing to make the website disclosures required by the relief)?

If you are involved in managing an employee entitlement fund, we recommend seeking guidance about how to comply with the transitional relief and how to navigate the licensing process.

Reach out to the HW Funds team, the leading experts in AFS licensing and management investment schemes in Australia, for assistance with all aspects of implementing these significant changes.

[1] Corporations Act s994B(1)(b) and (c)

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