AFSL vs CAR: A practical guide for Australian fund managers

Operating a fund is a financial service under the Corporations Act 2001 (Cth) (Corporations Act) in Australia. That makes choosing a licensing pathway one of the first decisions you need to make when setting up a fund. 

There are two main options: applying for your own Australian Financial Services Licence (AFSL), or operating as a Corporate Authorised Representative (CAR) under someone else's. This article covers both and what to weigh up when choosing between them.

At a glance

• Operating a fund means you’re providing a financial service, which requires a licence by law
• Applying for your own AFSL means satisfying ASIC that your business can meet a set of general obligations from the day the licence takes effect
• Under a CAR arrangement, an existing licensee authorises your entity to provide specified financial services on its behalf
• Time is a significant factor in choosing a licensing path – many managers start under a CAR arrangement and apply for their own AFSL later

What is an AFSL and do you need one to run a fund in Australia?

An Australian Financial Services Licence (AFSL) is the authorisation that ASIC grants to a business that provides financial services in Australia. 

Section 911A of the Corporations Act requires a person who carries on a financial services business in Australia to hold an AFSL covering the services they provide, unless an exemption applies. Issuing interests in a fund, dealing in those interests and giving financial product advice about them all sit inside that definition. Therefore, running a fund is a financial service, so you need to either hold an AFSL or operate as a Corporate Authorised Representative (CAR) under someone else’s.

What are the AFSL requirements for fund managers?

To hold an AFSL, you need to satisfy ASIC that your business can meet the general obligations set out in the Corporations Act. ASIC is explicit that those obligations apply from the first day the licence takes effect, which means the systems have to exist at the time you apply rather than after an AFSL is granted.

At a high level, the general obligations require you to:

• Provide the services covered by your licence efficiently, honestly and fairly
• Manage conflicts of interest
• Comply with your licence conditions and the financial services laws, and take reasonable steps to ensure your representatives do the same
• Hold adequate financial, technological and human resources
• Maintain the competence to provide the services on your licence, with representatives who are trained and competent
• Maintain adequate risk management systems

Looking into these a bit more, the following two areas carry much of the weight for a first fund.

Organisational competence

ASIC judges your competence by the people running the business, who it calls responsible managers. They need to be the ones making significant day-to-day decisions about your financial services, and between them they need to cover every service and product on the licence. Each has to demonstrate relevant knowledge and experience against one of the five pathways in Regulatory Guide 105, and ASIC expects most applicants to nominate at least two. Where a licence rests heavily on one person, ASIC can attach a key person condition, and you have to notify ASIC whenever a responsible manager changes.

Retail versus wholesale scope

Most venture and private capital funds in Australia offer to wholesale investors only. This avoids retail investor obligations, including registering your fund with ASIC, internal and external dispute resolution and AFCA membership.

Remember that licensing sits alongside the rest of your compliance obligations as a fund manager. Other obligations include KYC regulations and AML/CTF compliance, which recently changed under the 2026 reforms. 

What does applying for an AFSL in Australia involve?

An AFSL application is a structured process, run through ASIC’s Regulatory Portal. It involves:

1. Scoping your authorisations. Deciding which financial services and products the licence needs to cover, and whether you are applying for wholesale clients only. This determines the fee, evidence and assessment.
2. Nominating your responsible managers and assembling proof. Each nominee needs documented qualifications and relevant experience matched to one of the five pathways in RG 105.
3. Building the compliance framework. Risk management systems, conflict arrangements, compliance measures and resourcing all need to be real at lodgement, because the obligations apply from day one of the licence.
4. Lodging through the portal. This includes paying the lodgement fee, which ranges from about $1,500 to around $5,000. 
5. Responding to ASIC's questions. If required, answering promptly is likely to keep your application moving.

On timing, ASIC's service charter sets a target of deciding 70% of complete applications within 150 days, and 90% within 240 days. Note that the clock runs from a complete application, so the drafting and evidence-gathering that precedes lodgement sits on top of those timeframes.

In addition to the lodgement fee, there are significant preparation costs including legal advice, compliance frameworks and adviser fees commonly landing between $10,000 and $70,000, depending on how much you outsource. Beyond that, there are ongoing regulatory, compliance management, insurance and mandatory auditing costs each year.

What is a corporate authorised representative (CAR)?

A corporate authorised representative (CAR) is a company or entity that an AFS licensee has authorised to provide specified financial services on the licensee's behalf.

Many funds operate as a CAR under an AFSL held by another entity, such as a platform like Ventari. The mechanics of this include the following:

• A trust cannot be an authorised representative, though individuals or groups acting as trustees can be. 
• The appointment is public: the licensee must notify ASIC within 30 business days, and you appear on the Authorised Representatives Register with an ASIC-issued number.
• The licensee answers to the client for your conduct. That’s why a licensee takes an interest in how you operate, and why any agreements you sign will usually place the commercial risk mainly on you.

Who issues the units to investors under a CAR arrangement?

A common way to do this involves a wholesale unit trust. In this arrangement, if the AFS licensee has the appropriate authorisations, they can act as the trustee, otherwise they may work with you to appoint a professional trustee who holds the assets and issues the units. In both cases, either the AFS licensee or the professional trustee handles the regulated act of issuing the product to investors. 

If you are running a syndicate rather than a fund, the same structure applies.

What’s the difference between an AFSL and a CAR?

There are many differences between an AFSL and a CAR arrangement. It mostly boils down to who holds the regulatory relationship with ASIC, and what that leaves you responsible for. We’ve summarised this below. 

Your own AFSL

• Timeframe: Months. AFSL applications take roughly 150–240 days to process (and there’s no guarantee of success).
• Upfront costs: ASIC lodgement fee plus legal, compliance and adviser fees. Expect roughly $10,000–$70,000.
• Ongoing costs: Regulatory fees, compliance management, insurance and mandatory auditing. Expect approximately $20,000–$50,000 per year.
• Who holds the licence: You.
• Who issues the units: Your licensed entity or its appointed trustee.
• Responsible managers: Required. ASIC expects at least two, each meeting an RG 105 pathway.
• Primary regulatory liability: You.
• Reporting and audit: Annual financial statements, audit and breach reporting to ASIC.

CAR arrangement

• Timeframe: Days to weeks. The licensee appoints you and notifies ASIC within 30 business days.
• Upfront costs: Establishment fee charged by the licensee (typically includes any ASIC fees).
• Ongoing costs: Ongoing fees to the licensee, usually a set monthly fee and/or a percentage of your setup fee and, upon success, carried interest (carry).
• Who holds the licence: The licensee.
• Who issues the units: The licensee or its appointed trustee.
• Responsible managers: Not required of you. The licensee maintains its own.
• Primary regulatory liability: Sits with the licensee for client-facing conduct, though you retain your own obligations under the CAR agreement and to ASIC.
• Reporting and audit: The licensee reports, and you report to the licensee.

If you’re working out which licensing path suits your fund, feel free to book a call with our team and we'll walk through the options with you.

What should you ask before signing a CAR agreement?

Price and turnaround time are the obvious points of comparison when you’re speaking to CAR providers. But the level of service and support you'll receive, as well as the quality of the licence you’re operating under, are also very important.

To help illustrate this, in 2024 the Federal Court ordered Lanterne Fund Services to pay a $1.25 million penalty after it failed to comply with six of the general obligations of AFS licence holders. Lanterne had one full-time employee and ran an AFSL licensee for hire model with more than 60 corporate authorised representatives (CARs) and under them, 205 authorised representatives. 

The questions worth asking before you sign any CAR arrangement include:

• How many representatives sit under the licence and who monitors them? 
• Who at the licensee is actually resourced for compliance and how many of them are there?
• What are the authorisations on the licence and do they cover everything your fund needs to do?
• Who issues the units and who is named as trustee?
• What does the indemnity clause say? 
• What happens to your fund if the licence is suspended, cancelled or the licensee exits the market?
• What are the exit terms, and what does it take to leave and move to another licensee or to your own licence?
• What monitoring and audit process will you be subject to and how often?

Ask for the licence number and check it on ASIC Connect. Also, the Authorised Representatives Register is public, so you can see who else is operating under that licence.

Can you start as a CAR and apply for your own AFSL later?

Yes, and this is the sequence that many Australian fund managers follow.

Nothing in the Corporations Act ties you to one path. You can operate under a licensee while you raise and deploy your first few funds, then apply for your own licence when the economics justify the cost and compliance load.

There is a practical argument for this sequence. Each responsible manager is required to demonstrate relevant experience, and the years you spend running deals under a CAR arrangement are the type of experience ASIC assesses. A first-time manager who applies for an AFSL before running a fund often has a thinner application than the same person applying a few years later.

If you do apply, your existing arrangement continues until your own licence takes effect, and the licensee notifies ASIC when the authorisation ends.

Where to start

Whichever licensing path you take, the thing that matters most is understanding the structure you’re operating in. In other words: who holds the licence, who issues the units, who is accountable for what, and where your liability sits.

If you're weighing this up, a good first step is to map your fund's timeline against the licensing timeline. A manager who needs to be in market this financial year is making a different decision from one raising in two years' time. It's also worth reading the guide on how to launch a VC fund in Australia, which sets the licensing decision alongside structure, compliance and operations.

And if you'd like to see how Ventari handles compliance and talk through the structure for your fund, book a time with our team.

This article is general information about AFS licensing and authorised representative arrangements in Australia, current as at 24 August 2026. It doesn't take your circumstances into account and isn't legal, tax or financial advice. ASIC fees, processing times and regulatory requirements change, and your obligations depend on the structure you use and the services you provide. Please obtain your own advice before acting. To see how Ventari supports fund managers, please get in touch. 

Frequently asked questions

Do I need my own AFSL to run a fund in Australia?

No. Most first-time managers operate as a corporate authorised representative under an existing AFSL holder, which is faster and often better suited to a first fund. The licensee holds the licence and a professional trustee issues the units to investors. You're welcome to book a call with our team for more info but always seek professional advice before choosing your structure. 

What is the difference between an AFSL and a CAR?

An AFSL is your own licence, and it makes you directly responsible for the obligations that come with holding one. A CAR arrangement authorises your company to provide named services on an existing licensee's behalf, so the licensee holds the licence, sets the compliance framework and answers to investors for your conduct. The main practical question is where you want the compliance load to sit while you raise your first fund, and how quickly you want to get started.

How long does an AFSL application take?

ASIC aims to decide 70% of complete applications within 150 days and 90% within 240 days. The clock starts once your application is complete, so the months of drafting and evidence gathering come before it. Alternatively, a CAR arrangement under an existing licence usually takes weeks.

How much does it cost to get an AFSL?

The ASIC lodgement fee for a wholesale licence lodged online by a company runs to a few thousand dollars. Preparation costs considerably more – expect roughly $10,000–$70,000 in legal, compliance and adviser fees, depending on how much you outsource.

Who issues the units to investors if I'm not licensed?

If you’re operating a fund as a CAR under someone else’s AFSL, the trustee issues units to investors. The AFSL holder can act as trustee or appoint a professional trustee to hold the assets and issue the units. This also means one entity sits on the cap tables of any companies your fund invests in, rather than every investor. 

Can I raise capital while my AFSL application is being assessed?

No, at least not in the sense of taking commitments. Offering interests in a fund needs to be covered by a licence before you make the offer. You can still test the market by sharing your thesis and having exploratory conversations with prospective LPs, provided you stop short of making an offer or accepting money. This is one of the more common reasons managers start under someone else's licence and apply for their own later.

What happens if my licensee is investigated or loses its licence?

Your authority to operate comes from that licence, so anything affecting it affects you. If your licensee’s licence is suspended or revoked you will need to find another licensee willing to take you on as a CAR. Before you sign an agreement, check how much compliance resourcing actually sits behind the licence. If the licensee is also acting as your trustee, ensuring the trust deed allows for the removal and appointment of the trustee is necessary if the current one cannot continue.

Can I move from a CAR arrangement to my own AFSL later?

Yes. Time spent running deals under someone else's licence builds the type of experience ASIC looks for in AFSL applications, so a manager applying after a first fund (or a few) generally presents a stronger case than the same person applying before having run a fund at all. If you do apply for an AFSL down the track, your existing CAR arrangement runs until your own licence takes effect. We work with managers on both sides of that transition, so if you're mapping out the sequence, get in touch.