Do Property Developers Need an Australian Financial Services Licence?

By Andrew Patrick, Managing Director MARQ Trustees

Raising money for a development project can quickly move a property developer into the world of financial services regulation. Many assume an Australian financial services licence (AFSL) is something only financial advisers and fund managers need. However, the way projects are funded can bring them squarely within the scope of Australia’s financial services laws.

If you are a developer raising money from investors for a project, there’s a very high chance you need an AFSL. Understanding why this is the case — and what happens if you ignore the requirement — is critical for protecting both your business and your reputation.

Common Misconceptions about “exemptions”

Developers are frequently told by professional advisers or colleagues that they don’t need an AFSL, because, for example:

  • They are only raising money from wholesale investors

  • They are only raising money from people they know

  • They are raising less than $2 million, from less than 20 people (the so-called “20/12/$2m rule”)

  • They haven’t raised money before, so are only doing it for the first time, or

  • They are a developer, not someone who is carrying on a financial services business.

These are common misconceptions, with serious consequences. In each of these circumstances, the AFSL requirement still applies.

It doesn’t matter whether your investors are family, friends, or wholesale investors. Nor does it matter if you raise less than $2 million, or keep the group to fewer than 20 investors. These so-called “exemptions” often only remove regulated disclosure obligations (the need to prepare a product disclosure statement or a prospectus) — they do not remove the need for an Australian Financial Services licence).

Our ‘Exemptions brochure’ explains these misconceptions is more detail.

When an AFSL is Required

An AFSL is needed by anyone “carrying on a financial services business.” However, despite common beliefs to the contrary, virtually everyone who raises money in Australia will be taken to carry on a financial services business and will require an AFSL, regardless of the method used, the type of investors involved, how the money is to be used, what their usual day-to-day business is, or how many times they raise money. 

The exemptions to this are so rare, that the only safe and realistic assumption is that you are not exempt. This includes property developers.

For property developers, an AFSL is needed when, for example:

  • Funds are raised from investors. If any investors contribute money to a development being carried-out by a developer, this will be either a “managed investment scheme” or an investment in a company.

  • A property investment opportunity is promoted. Even merely telling potential investors about your project can amount to providing what is called “general financial product advice”. This requires an AFSL. It doesn’t matter who the potential investors are – you might already know them, and they might be wholesale investors. It doesn’t matter under the licensing rules.

  •  The “interests” in the investment are issued (after the money is taken from the investors). Units in a trust, shares in a company, or other interests offered to investors are “financial products” under the Corporations Act. An AFSL is needed to issue those to investors.

The Consequences of Getting it Wrong

The penalties for offering an investment in a property development without an AFSL can be severe. Developers and their advisers face risks, including:

  • Civil penalties and compensation orders

  • Director bans and reputational damage

  • Liquidation of projects mid-development

  • Criminal liability.

Recent cases highlight ASIC’s focus on unlicensed property investment offers. In March 2025, for example, a property developer was banned for six and a half years for offering investments in projects without an AFSL. The group collapsed, leaving creditors owed $131 million. In another recent example, an unlicensed property scheme promoter was personally fined $1.25 million.

What You Should Do

If you are funding a project just through your own capital and bank debt, you may not need an AFSL. However, if you intend to raise money from others (including even family and colleagues), it is imperative to:

  • Obtain expert legal advice. Get advice from lawyers who specialise in and understand financial services laws. Don’t rely on informal guidance or myths about licensing “exemptions”.

  • Get an experienced AFSL holder involved. Developers can use a licensed professional trustee, which will allow them to raise funds lawfully, whilst focusing on what they are good at – property development.

Conclusion

Property development and financial services laws are more closely connected than many understand. It is an area rife with misconceptions and misunderstandings, even amongst professional advisers. If you are raising any capital from investors, regardless of who they are, then the chances are you need an AFSL. Ignoring this requirement exposes your project, your business, your investors and your reputation.

Getting the structure right from the start is not just about legal compliance. It is also about building credibility with investors and helping to ensure your projects can succeed.

At MARQ Trustees, we work with developers, advisers, and investors to ensure fundraising is compliant, efficient, and aligned with commercial objectives.