ASIC has outlined its approach to the regulation of employee redundancy funds under the Corporations Act 2001 (Corporations Act), once the current relief expires on 1 April 2026.
Operators of employee redundancy funds and long service leave funds (now referred to as employee entitlement schemes) will be required to apply for an Australian financial services (AFS) licence and comply with some managed investment provisions of the Corporations Act.
Following ASIC’s Consultation Paper 384 Employee redundancy funds (CP 384), this proposed approach (Option 2(b)) received the most support from stakeholders.
ASIC’s approach will be subject to the following transitional arrangements:
- Fund operators will have until 1 September 2026 to apply for an AFS licence.
- Between 1 April 2026 and ASIC’s determination of the licence application, we will provide relief from the licensing, managed investment and associated provisions of the Corporations Act with additional conditions. These include requirements to hold fund property on trust, make fund information publicly available, prepare audited financial statements and manage conflicts of interest.
To assist fund operators, in early 2026, ASIC will release further information on the transitional arrangements, the licence application process and requirements that will apply once a licence is granted.
ASIC Commissioner Alan Kirkland said, ‘ASIC’s approach to regulation commonly evolves in response to changes in markets.
‘Since ASIC first granted relief for these types of funds, there has been a significant increase in funds under management and a broadening of the scope of activities undertaken by some funds.
‘Our approach will introduce additional transparency and governance requirements for these funds that reflect the changes in the sector,’ Mr Kirkland said.
Consultation
ASIC’s decision follows consideration of 19 submissions received in response to CP 384. Submissions were generally supportive of increased requirements applying to fund operators. For a summary of the feedback and ASIC’s response, see below.
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Background
Employers make contributions to employment entitlement schemes to fund benefits payable on redundancy or long-service leave entitlements for employees.
In 2003, employee redundancy funds had approximately $500 million under management, which by 2015 had increased to $2 billion. ASIC is aware that some funds individually have close to or over $1 billion under management. Funds also undertake a broader range of activities than when the original relief was introduced.
Fund operators were granted relief from the licensing, managed investment and associated provisions of the Corporations Act since 2000. In September 2024, ASIC extended the relief for a transitional period of 18 months pending our public consultation.
