In Australia, the requirement to hold an AFSL under section 911A of the Corporations Act 2001 (Cth) is triggered by the act of carrying on a financial services business. This obligation applies even if financial services are incidental to your main business.

At Click Legal, our AFSL lawyers specialise in licensing, compliance, and enforcement matters. Below is a comprehensive guide covering: 

• What is an AFSL
• Services and products that require an AFSL
• The “carrying on a business” test
• Credit licensing obligations (ACL)
• Foreign financial services provider (FFSP)
•  Retail vs Wholesale Clients
•  AML/CTF registration obligations (AUSTRAC)
•  Consequences of non-compliance

What is an Australian Financial Services Licence (AFSL)?

An AFSL is a licence issued by the Australian Securities and Investments Commission (ASIC) that authorises individuals or companies to provide financial services in Australia. It is a cornerstone of the Australian regulatory regime, ensuring that financial service providers:

•     Operate efficiently, honestly, and fairly.
• Meet ongoing compliance and reporting obligations.
•     Protect retail and wholesale clients through appropriate conduct.

 Without the correct licence or exemption, you may be operating unlawfully, exposing yourself to enforcement action and reputational damage.

 👉 See our AFSL Lawyers at Click Legal for expert guidance on licensing applications and compliance reviews.

When Do You Need an AFSL?

Under section 911A of the Corporations Act 2001 (Cth), you generally need an AFSL if you are carrying on a financial services business in Australia. This requirement applies even if:

•     It is not your main source of income
•     You don’t make a profit from it
•     It forms only one part of a broader, non-financial business

You may also operate under a Corporate Authorised Representative (CAR) arrangement, where a licensee authorises you to provide financial services under their AFSL.

Key Financial Services Requiring an AFSL

You will likely need an AFSL if you carry on a financial services business to: 

• provide financial product advice to clients for example, giving a recommendation to clients or the general public about which financial product they should purchase.
• deal in a financial product for example, buying or selling shares on behalf of a client or issuing interests in a managed investment scheme.
• make a market for a financial product for example, where you regularly quote prices at which people can buy or sell financial products.
• operate a registered managed investment scheme (MIS).
• provide a custodial or depository service for example, holding a financial product, or a beneficial interest in a financial product on trust for a client
• provide traditional trustee company services for example, preparing estate management functions
• provide a crowd funding service
• provide a superannuation trustee service
• provide a claims handling and settling service, or
• operate the business and conduct the affairs of a corporate collective investment vehicle (CCIV).

ASIC - Do you need an AFS licence?

ASIC - Requirements to hold an AFS licence

Financial service and financial products are defined in chapter 7 of the Corporations Act and the Corporations Regulations 2001.

The definitions are complex and subject to express inclusions, qualifications and exceptions.

If you deal with any of these financial products, you are likely within AFSL scope:

·       Securities – shares, bonds, debentures.

·       Managed investment schemes – interests in funds.

·       Insurance products – life, general, and consumer credit.

·       Superannuation products – retirement savings.

·       Deposit and payment products – including non-cash payments.

·       Credit products – such as derivatives, margin loans, and FX contracts.

Digital products: Crypto-assets and Initial Coin Offerings (ICOs): ASIC’s INFO 225 guidance confirms some tokens and digital assets may be treated as financial products. Whether an AFSL is required depends on a case-by-case assessment.

Carbon credit: Even if you are exempt from licensing, you may still need to comply with other laws (e.g., consumer protection under the Australian Consumer Law) ASIC REGULATORY GUIDE 236.

Credit Activities – Australian Credit Licence (ACL)

 If you provide services related to consumer credit or leases covered by the National Consumer Credit Protection Act 2010 (Cth) (NCCP), you must hold an Australian Credit Licence (ACL).

This includes:

·        Consumer credit contracts.

·        Consumer leases.

·        Buy Now, Pay Later (BNPL) products – now being brought into the regime as low-cost credit contracts.

⚠️ Note: The National Credit Code applies only if the debtor is a natural person or strata corporation.

Retail vs Wholesale Clients

Australia’s AFSL regime differentiates between retail and wholesale clients:

• Retail clients are entitled to enhanced disclosure, conduct, and dispute resolution protections.
• Wholesale clients may be exempt from some requirements, but not from the need for a licence itself.

This distinction has significant implications for AFSL scoping and compliance.

Foreign Financial Services Providers (FFSPs)

Foreign entities providing financial services in Australia may need:

• A standard AFSL;
• A Foreign AFSL (FAFSL) – available if regulated in a “sufficiently equivalent” jurisdiction; or
• Reliance on funds management relief or other exemptions.

Recognised equivalent regimes include Denmark, Germany, Hong Kong, France, Luxembourg, Ontario (Canada), Singapore, Sweden, the UK, and the US.

Australia also participates in the Asia Region Funds Passport (ARFP), which streamlines cross-border managed fund distribution.

Key indicators that you may be carrying on a financial services business

When assessing whether your activities amount to carrying on a financial services business, regulators and courts consider factors such as:

·  A Place of Business in Australia

Do you maintain an office, branch, or permanent base here?

·   A Share Transfer or Registration Office

Have you established an Australian office for share transfers or shareholder registrations?

·        Administration or Management of Property

Are you acting as an agent or trustee in managing or administering property in Australia?

Beyond location, the nature and frequency of your activities is critical. The courts look at the degree of system, repetition, and continuity.

Importantly, even a single transaction could be treated as carrying on a business if it is the first step in an intended series.

Activities that alone do not amount to carrying on a business

Certain activities on their own are not sufficient to constitute carrying on a financial services business, including:

• Maintaining an Australian bank account.
• Holding directors’ or shareholders’ meetings in Australia.
• Creating evidence of debt or property charges.
• Conducting isolated transactions completed within 31 days.
• Passively investing funds or holding property.

These are considered incidental or administrative and don’t, by themselves, create a financial services business presence.

Why it matters

If your activities do amount to carrying on a financial services business in Australia, you will generally need an AFSL unless an exemption applies. Operating without a licence when one is required carries significant regulatory and reputational risks, including enforcement action by ASIC.

ASIC Enforcement and Penalties

Operating without an AFSL is a serious breach of the Corporations Act. Penalties include:

• Civil and criminal sanctions – including imprisonment.
• Heavy fines – in the millions for corporations.
• Stop orders halting unlicensed activities.
• Asset freezing.
• Banning orders against individuals.
• Court-ordered wind-ups of companies.
• Compensation orders for clients.

ASIC actively enforces AFSL compliance. Even a single unauthorised financial service can attract scrutiny if it is intended as part of ongoing unlicensed operations.

Key takeaway

The line between incidental activity and carrying on a financial services business is not always clear. If your operations involve more than isolated or administrative acts, you may need to consider whether an AFSL (or an exemption) applies.

How Click Legal Can Help

At Click Legal, our team of AFSL lawyers can assist with:

·        AFSL applications and variations.

·        Structuring Corporate Authorised Representative (CAR) arrangements.

·        AFSL compliance reviews and independent audits.

·        Advising on licensing exemptions.

·        ACL applications for credit businesses.

·        AML/CTF programs and AUSTRAC registration.

·        Supporting FFSPs entering the Australian market.

👩‍⚖️ Contact our AFSL Lawyers today for a free initial consultation and expert advice tailored to your business.

💡 Tip for businesses: If you’re expanding into Australia or are already engaging with Australian clients, seek legal advice early to avoid inadvertent breaches of the Corporations Act. Correct licensing is not just about compliance, it builds trust and credibility with clients, investors, and regulators.

 If your activities touch on any of the services or products listed above, seeking legal advice is essential to ensure you comply with your licensing obligations.

 Talk to our industry leading AFSL Lawyers and get your free initial consultation today.