What Is a Financial Product Under the Corporations Act? Definition, Types and AFSL Requirements

Introduction

Whether an arrangement is a financial product largely determines whether the financial product and financial services rules in Chapter 7 of the Corporations Act 2001 (Cth) (‘Corporations Act’) apply to a business. For this purpose, 762A of the Corporations Act sets out three stages: the general definition, specific inclusions and exclusions.

Businesses developing, issuing or providing services in relation to financial products should classify their arrangements accurately because classification affects their regulatory obligations, including whether they need an Australian Financial Services Licence (AFSL). The discussion covers examples and exclusions, distinguishes financial products from financial services, and addresses how digital assets are assessed by their rights, benefits and structure.

Interactive Tool: See If Your Product Is a Regulated Financial Product

What Is a Financial Product Under the Corporations Act for Australian Financial Services Businesses?

Facilities for a Financial Investment

Under Section 762C of the Corporations Act, a facility includes intangible property, an arrangement or term of an arrangement, or a combination of these.

Additionally, Section 763A of the Corporations Act sets out that a facility is a financial product if a person uses it to:

• make a financial investment;
• manage financial risk; or
• make non-cash payments.

Under Section 763B of the Corporations Act, a person makes a financial investment by providing money or money’s worth to another person for a financial return or other benefit, without day-to-day control over how the contribution is used. Paying for shares or contributing to a registered scheme may meet this definition.

Facilities for the Management of Financial Risk

Under Section 763C of the Corporations Act 2001, a person manages financial risk when they manage the financial consequences of particular circumstances or limit the financial consequences of changes in receipts, costs, prices or interest rates.

Facilities that may meet this purpose include:

• insurance;
• futures contracts used to hedge a liability; and
• currency swaps.

Employing a security firm may manage the risk of theft, but it does not manage the financial consequences if a theft occurs.

Facilities for Non-Cash Payments

Under Section 763D of the Corporations Act, a person makes a non-cash payment when a payment is made, or caused to be made, without physically delivering Australian or foreign notes or coins.

Facilities that may fall within this category include:

• direct debits;
• cheques;
• purchased payment facilities; or
• traveller’s cheques.

A digital wallet may also be a non-cash payment facility where it allows payments to third parties. Section 763D of the Corporations Act excludes some arrangements, including:

• a facility through which payments can be made to only one person; and
• specified financial institution instruments.

What Products Are Specifically Included as Financial Products?

Section 764A of the Corporations Act specifically identifies several facilities as financial products. Importantly, under Section 762A, these listed facilities are financial products even if they do not meet the general definition in Section 763A.

The listed products include:

• securities;
• interests in registered and certain unregistered managed investment schemes;
• derivatives;
• contracts of insurance;
• life policies;
• sinking fund policies;
• superannuation products;
• deposit-taking facilities made available by an authorised deposit-taking institution in its banking business;
• certain foreign exchange contracts;
• debentures, stocks or bonds issued, or proposed to be issued, by a government;
• Australian carbon credit units;
• eligible international emissions units; and
• margin lending facilities.

Under Section 761D of the Corporations Act, a derivative is generally an arrangement where a party must, or may be required to, provide something of value at a future time, and the amount provided or the value of the arrangement depends on, or varies with, something else, such as an asset, rate, index or commodity. The definition is subject to the timing requirement in Section 761D(1)(b) and the exclusions in Sections 761D(3)–(4).

A product issuer should assess the precise features of the facility because Section 764A of the Corporations Act contains specific qualifications for some listed products.

Statutory Exclusions Relevant to Australian Businesses

Specific Statutory Exclusions Under Section 765A

Section 765A of the Corporations Act excludes specified facilities from the definition of a financial product, even where the facility falls within the general definition or a specific inclusion. Key exclusions include:

• Credit facilities, except margin lending facilities. Regulation 7.1.06 of the Corporations Regulations identifies several credit arrangements, including deferred payment arrangements, mortgages securing credit contracts and guarantees of credit obligations.
• Certain insurance arrangements, including health insurance, Commonwealth insurance, State or Northern Territory insurance, reinsurance and some employer-issued insurance.
• Facilities connected with financial markets, clearing and settlement facilities, payment systems and the exchange or settlement of non-cash payments.

Other exclusions include:

• immediately settled currency exchanges;
• prescribed superannuation interests;
• certain interests in managed investment schemes;
• funeral benefits;
• physical infrastructure; and
• facilities declared by ASIC or regulations not to be financial products.

Incidental Financial Products & Broader Facilities

Section 762B of the Corporations Act deals with a broader facility containing several components. Where one component is a financial product, the Corporations Act applies to that facility only to the extent of the financial product component.

Section 763E of the Corporations Act provides an incidental product exception. A product that would otherwise be a financial product under Sections 763A to 763D is not a financial product where it is incidental to a broader facility, or to other facilities, and the main purpose of the combined arrangement is not:

• making a financial investment;
• managing financial risk; or
• making non-cash payments.

Section 763E of the Corporations Act does not override the specific inclusions in Section 764A. A product treated as incidental may still be a financial product if it is specifically included under Section 764A.

The Status of Digital Assets & Fintech Products

Application of Statutory Tests to Digital Assets

Digital assets are not automatically financial products, nor are they automatically excluded. Each digital asset, and any arrangement connected with it, must be assessed against the same statutory tests that apply to any other facility under Sections 763A–765A of the Corporations Act. The assessment considers whether the digital asset or arrangement:

• is a facility through which a person makes a financial investment, manages financial risk or makes non-cash payments under Section 763A;
• is an incidental product under Section 763E;
• is specifically included under Section 764A, for example as a security, an interest in a managed investment scheme or a derivative; or
• is specifically excluded under Section 765A.

ASIC’s Information Sheet 225 (INFO 225) explains how ASIC considers these statutory tests apply to digital assets. INFO 225 is regulatory guidance rather than law. It does not change the Corporations Act or bind a court, but it indicates how ASIC interprets the current law and is likely to apply it.

INFO 225 focuses on when a digital asset or related arrangement may be a facility for making a financial investment, an interest in a managed investment scheme, a security, a derivative or a non-cash payment facility, although ASIC notes this list is not exhaustive.

Its worked examples are hypothetical, and each digital asset must still be assessed on its own facts, including the rights and benefits attached to it.

The Impact of Rights & Features on Classification

ASIC’s view in INFO 225 is that a digital asset’s classification depends on the rights, benefits and features attached to it, rather than the technology used to create or transfer it. INFO 225 states that these rights may appear in:

• terms and conditions;
• a white paper;
• marketing material;
• client communications; or
• the operation of the arrangement.

Relevant features may include whether:

• holders receive financial returns or other benefits;
• contributions are pooled or used in a common enterprise;
• the asset allows payments to third parties; and
• its value depends on another asset, rate, index or commodity.

Moreover, changes to rights, benefits, features or use may change the asset’s legal status. A business may therefore need to reassess the digital asset and any related arrangements as they develop.

Separately, the Corporations Amendment (Digital Assets Framework) (‘Corporations Amendment’) was formally approved on 8 April 2026 and is scheduled to take effect on 9 April 2027.

It introduces a regulatory framework for digital asset platforms and tokenised custody platforms, with a six-month statutory transition period under Sections 1730–1732 of the Corporations Act, as inserted by Schedule 1, Item 98 of the Corporations Amendment. Operators that apply for an AFSL or licence variation during that period may receive transitional treatment until ASIC decides their application.

The reform introduces digital asset platforms and tokenised custody platforms as specific financial products under new Sections 764A(1)(la)–(lb) of the Corporations Act, without automatically classifying every underlying digital token as a financial product.

Until these amendments commence, the existing financial product and financial services laws continue to apply, including the AFSL requirement under Section 911A(1) where relevant.

Why Financial Product Classification Is Relevant for AFSL Applicants & Licensees

How Financial Product Classification Affects Financial Services

Financial product classification is the starting point for working out a business’s AFSL obligations. It determines whether the business’s activities are financial services, whether those services require an AFSL and which authorisations the licence must include.

A financial product is the facility classified through the framework in Sections 763A–765A of the Corporations Act. By contrast, a financial service is a distinct concept, defined in Section 766A(1), which includes:

• providing financial product advice;
• dealing in a financial product;
• making a market for a financial product;
• operating a registered scheme;
• providing a custodial or depository service;
• providing a crowd-funding service;
• providing a claims handling and settling service;
• providing a superannuation trustee service;
• engaging in other conduct prescribed by the Corporations Regulations; and
• operating the business and conducting the affairs of a corporate collective investment vehicle (CCIV).

As a result, whether an activity is a financial service generally depends on whether the facility it relates to is a financial product. If the facility is not a financial product, dealing in it or advising on it will generally not be a financial service.

Classification also is relevant for businesses that do not issue the product. Under Section 766C of the Corporations Act, dealing includes:

• applying for, acquiring, issuing, varying or disposing of a financial product, and underwriting securities or managed investment scheme interests; and
• arranging for another person to undertake those activities, unless the arranging amounts only to giving financial product advice.

A business that arranges or trades in another issuer’s financial product may therefore be providing a financial service.

How Product Classification Affects AFSL Requirements

Under Section 911A(1) of the Corporations Act, a person carrying on a financial services business in Australia must hold an AFSL covering the financial services provided, unless an exemption applies. Because the licensing requirement attaches to financial services, and financial services generally relate to financial products, classification determines whether the requirement is triggered at all.

Where the facility is a financial product, the business must hold an AFSL or rely on an exemption. For example, under Section 911A(2)(a) of the Corporations Act, a person does not need their own AFSL when providing the service as a representative of an AFSL holder whose licence covers that service.

Businesses unsure about those obligations can seek advice from financial services lawyers advising on AFSL requirements. For example, under Section 911A(2)(a) of the Corporations Act, a person does not need their own AFSL when providing a service as a representative of an AFSL holder whose licence covers that service, provided the representative complies with the applicable requirements under Section 911B.

How Classification Affects AFSL Authorisations & Variations

Because Section 911A(1) of the Corporations Act requires the licence to cover the services actually provided, the authorisations required depend on the financial services, financial products and client types involved, including whether clients are retail or wholesale under Section 761G.

In this regard, ASIC’s Regulatory Guide 1 (RG 1) explains that licence authorisations affect the services that may be provided, the products to which those services may relate and the obligations applying to the licensee.

This means an incorrect classification can lead to an incorrect assessment of the licence authorisations required. If a business treats a financial product as falling outside the regime, or identifies the wrong type of financial product, it may apply for authorisations that do not match its activities. It may then provide financial services its licence does not cover, contrary to Section 911A(1) of the Corporations Act.

For the same reason, a licensee that expands into financial services or products its licence does not cover will need ASIC to vary its licence conditions under Section 914A of the Corporations Act before providing them, unless an exemption applies.

How Australian Businesses Can Determine Whether Their Product Is Regulated

Assessment of Legal Rights & Statutory Definitions

As a first step, a business should assess its product’s legal rights, benefits, features and structure with support from corporate and commercial lawyers for financial product structuring, including how the arrangement operates and is presented to customers. As outlined above, the assessment under Section 762A of the Corporations Act follows the three stages of the general definition, specific inclusions and overriding exclusions.

An arrangement that appears to involve an investment may still fall outside the financial product definition after the relevant inclusions and exclusions are assessed.

Review of ASIC Guidance to Identify Licensing Obligations

Consistent with INFO 225, businesses should assess each product and related arrangement on its facts and circumstances, considering the offering documents, terms, white papers, marketing material, client communications and operation discussed above.

Alongside this, a separate licensing assessment should identify the financial services the business provides, such as advice, dealing, market making or custodial services. As noted above, under Section 911A(1) of the Corporations Act, carrying on a financial services business in Australia generally requires an AFSL covering those services unless an exemption applies.

Conclusion

The Corporations Act applies a three-stage framework under Section 762A: the general definition, specific inclusions and overriding exclusions. Correct classification also requires separating the financial product from any financial service provided in relation to it. Under Section 911A(1), a person carrying on a financial services business in Australia generally requires an AFSL covering those services, unless an exemption applies.

That assessment should be completed before launching, issuing or providing services involving a product, including a digital asset. Contact Click Legal’s financial services lawyers for advice on product classification and AFSL requirements to discuss the product’s legal features, potential Chapter 7 classification and relevant AFSL requirements.

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