If you are working in or entering Australia’s financial sector, one of the first and most important decisions you will make involves licensing. And here is where things can get a little tricky. The Australian Financial Services (AFS) Licence and the Australian Credit Licence (ACL) are often mixed up, especially by new market entrants.
Both are regulated by ASIC, but their scope and application couldn’t be more different. That is where AFS licensing solutions can play a crucial role, helping businesses determine exactly which licence or combination fits their operations without costly missteps.
What Does an AFS Licence Authorise?
An AFS Licence is essential if your business provides financial product advice or deals in financial products. Think shares, managed investment schemes, superannuation, derivatives, or insurance. Whether you are running a financial advisory firm, managing investments, or offering general or personal advice about financial products, you’ll need this licence in place.
But it is not just about holding a piece of paper. AFS licensees must meet rigorous conditions, like demonstrating adequate financial resources, implementing robust dispute resolution processes, maintaining proper training and competence, and ensuring compliance with ongoing obligations.
Focused on Credit, Lending, and Borrowing?
An Australian Credit Licence is necessary for anyone involved in credit activities. This includes credit providers like lenders, mortgage brokers, and those who assist consumers with obtaining loans or leases. If your business helps arrange home loans, personal loans, or consumer leases, an ACL is what you need.
Although ASIC also oversees ACLs, the legal framework is different as it falls under the National Consumer Credit Protection Act. The core focus here is on responsible lending. Licensees must ensure their clients can afford the credit they are taking on, provide transparent disclosures, and offer dispute resolution avenues.
Overlap and Dual Licensing
The challenge often comes when businesses don’t fit neatly into one category. Take mortgage brokers, for example. Some only structure loans and stop there, while others might also advise clients on whether it is better to invest in property or superannuation. The first would need an ACL, the second may need both an ACL and an AFS Licence.
And that is the rub, many businesses operate across both spheres without even realising it. Financial advisers who help clients structure investments with geared property purchases, or brokers who also provide insights on wealth creation strategies, may find themselves needing dual authorisation.
Failing to get the right licensing can do more than bring a slap on the wrist. ASIC doesn’t shy away from imposing penalties, and the reputational damage can be long-lasting.
So, Which Licence Do You Need?
It really comes down to your business model. If your services are tied to financial product advice, investments, or superannuation, the AFS Licence is your baseline requirement. If you are helping people access or manage credit, the ACL is what you’ll need.
And if your services straddle both worlds? Then it’s time to think seriously about dual licensing, or at least working under the umbrella of someone who already holds both. This is where experienced AFS licensing firms can come in handy. Rather than wading through ASIC’s guidelines with a highlighter and a headache, a tailored solution helps pinpoint your regulatory responsibilities from day one.
They will also guide you through the application process, assist with structuring your compliance framework, and keep your business aligned as it grows or evolves.
Final Thoughts
Knowing the difference between an AFS Licence and an ACL directly impacts how you can legally and ethically operate. Get it wrong, and the consequences can be severe. Get it right, and you unlock the ability to operate with confidence and clarity.
If there is uncertainty about where your services land, don’t play the guessing game. Licensing is the foundation of everything that follows in the financial services space. Take the time, ask the right questions, and get the right support early on.