Unlicensed financial advice to debtors by Debt agreement administrators– early access to superannuation

Debt agreement administrators need to remember that financial advice must only be provided by qualified and licensed financial advisers or financial counsellors. Debt agreement administrators who do not hold the requisite licence are not authorised representatives of an Australian Financial Services Licensee and do not enjoy any exemption under section 911A of the Corporations Act 2001.

This reminder is provided in the context that, as part of the Federal Government’s COVID-19 economic response package, the Australian Tax Office (ATO) has implemented a measure to allow individuals affected by COVID-19 to access their superannuation early, up to $10,000 in 2019-2020 and a further $10,000 in 2020-2021.

In the current COVID-19 environment with many debtors suffering reduced incomes, it may be very tempting for debt agreement administrators to advise debtors to access their superannuation early to make any payments due towards their debt agreements. However, doing so may constitute ‘financial product advice’.

What is financial product advice?

A recommendation or a statement of opinion, or a report of either of those things, constitutes financial product advice under s766B of the Corporations Act if:

(a) it is intended to influence a person or persons in making a decision about a particular financial product or class of financial products, or an interest in a particular financial product or class of financial products, or could reasonably be regarded as being intended to have such an influence; and

(b) it is not exempted from the definition of ‘financial product advice’.

Giving such financial product advice to a debtor to access their superannuation early may:

  • constitute unlicensed financial advice in contravention of section 911A of the Corporations Act and
  • not be in the best interests of individuals in contravention of section 961B of the Corporations Act.

The Corporations Act imposes significant penalties for a contravention of section 911A.

If debtors are in need of advice regarding their superannuation, they should consider the information available on the ASIC Moneysmart website and seek the advice of a licenced financial adviser or financial counsellor.

Mark Findlay
Director – Regulation