Australia: Gift vouchers and loyalty schemes – popular programs but does yours comply with the Corporations Act?

Gift vouchers and loyalty schemes are popular ways for franchise networks to entice new customers and encourage brand loyalty. However, before implementing such a venture, it is important to consider any relevant legal requirements . Usually, such ventures will be considered in the context of the Competition and Consumer Act 2010 (Cth). However, it is also important to consider whether such they will fall within the scope of the financial services regime in the Corporations Act 2001 (Cth) (Corporations Act).

The Corporations Act

Under section 763A of the Corporations Act, a financial product is defined to include "a facility through which, or through the acquisition of which, a person...makes non-cash payments" (being payments otherwise than by the physical delivery of Australian or foreign currency in the form of notes and/or coins).

Based on this definition, products such as gift vouchers may constitute financial products, meaning they will be subject to the financial services regulatory regime set out in the Corporations Act unless an exemption applies. Likewise, some loyalty schemes may also technically fall within the scope of this regime.

If an arrangement falls within the scope of the regime, we recommend trying to ensure that the arrangement is set up in such manner so as to fall within an exemption. Otherwise, a franchisor might be required to obtain a financial services licence and comply with the significant obligations imposed by the financial services regulatory regime – a potentially expensive and timely exercise.

The Legislative Instrument – the key exemption for gift vouchers and loyalty schemes

The financial services regulatory regime outlined in the Corporations Act is quite broad. In acknowledgment of this, the Australian Securities and Investments Commission (ASIC) released a number of class orders relating to non-cash payment facilities (including loyalty schemes and gift facilities). These orders generally exempted the relevant non-cash payment facilities from the application of some or all of the financial services regulatory regime.

In 2015 the ASIC Corporations (Non-cash Payment Facilities Relief) Instrument 2016/211 (Legislative Instrument1 was issued to "remake" a number of existing class orders. The Legislative Instrument was made in respect of "non-cash payment facilities" such as gift vouchers and loyalty schemes and, generally, provides relief from complying with certain parts of the Corporations Act in relation to those facilities covered by the Legislative Instrument.

Gift vouchers

Most gift vouchers are likely to come within the ambit of the Legislative Instrument as they would likely fall within the definition of a "gift facility". "Gift facility" is defined as a non-cash payment facility in relation to which all of a number of requirements apply. Such requirements include that:

  1. the amount available on the facility is set when the facility is issued, cannot be increased and cannot be withdrawn as cash;
  2. the facility can be used on multiple occasions, is promoted as a gift product and is not a component of another financial product; and
  3. where the facility has an expiry date, it is clearly shown.

If a gift voucher (including the terms and conditions of that gift voucher) satisfies each of the conditions set out in the section 5 definition, then it will be considered a "gift facility" for the purposes of the Legislative Instrument and will be eligible for the relief offered by section 10 of the Legislative Instrument. Specifically, section 10 provides relief from complying with certain sections of the Corporations Act, including Part 7.9 which relates to financial product disclosure and includes other provisions relating to the issue, sale and purchase of financial products.

Given the above, when drafting terms and conditions for a gift voucher program, it is important to consider the Legislative Instrument. In particular, it is worth considering whether the program can (or should be) set up in such a manner so as to fall within the scope of the definition of a "gift facility" so that it will have the benefit of the relief offered by the Legislative Instrument. Gift vouchers that do not fall within the definition of "gift facility" will not qualify for the relief offered by the Legislative Instrument. For example, relief might not apply where:

  1. the facility can only be used once;
  2. the gift product can be re-loaded;
  3. the expiry date is not prominently and clearly disclosed; or
  4. the facility is promoted as an award.

Loyalty Schemes

Loyalty Schemes are also covered by the Legislative Instrument. "Loyalty scheme" is defined as a non-cash payment facility in relation to which a number of requirements are all met.2 Those requirements include that:

  1. the facility is issued as part of a scheme, the dominant purpose of which is to promote the purchase of goods or services from the promoter;
  2. the person who holds/uses the facility is granted credits for purchases;
  3. the credits can be used to make a payment for goods/services or obtain another benefit; and
  4. the facility is not a component of another financial product.

Based on the above definition many standard loyalty schemes used in franchise networks would be loyalty schemes for the purposes of the Legislative Instrument.

Pursuant to the LegislativeInstrument, a loyalty scheme (that falls within the scope of the definition above) is not a financial product for the purposes of Chapter 7 of the Corporations Act (which governs financial services and markets) and does not have to comply with subsection 601ED(5) (relating to registration) of the Corporations Act.3

It is paramount when reviewing the terms of a loyalty scheme that franchisors consider the Legislative Instrument to determine if their loyalty scheme will fall within the scope of the Legislative Instrument.

Other exemptions

The Legislative Instrument does not just cover gift facilities and loyalty schemes. It also addresses a number of other non-cash payment facilities such as non-cash payment facilities used for third party payments and prepaid mobile facilities.4

Depending on the type of franchise network, some of these exemptions may be relevant – for instance, the exemption relating to prepaid mobile facilities may be relevant to franchisors in the telecommunications industry. If you do have any programs in place that in way use non-cash payments, it is important that you consider how the Corporations Act may apply to those programs and whether you may be able to rely on any exemptions to obtain relief from complying with the Corporations Act.


The Legislative Instrument "remakes" a number of existing class orders and is of particular relevance to any franchise network that in any way deals with non-cash payment facilities. If you have a loyalty scheme, gift voucher program or any other arrangements or programs in place that deal with non-cash payments it is crucial to be aware of the Legislative Instrument and the protections it offers. In this regard, we recommend considering the Legislative Instrument before preparing terms and conditions for any such programs.

For further details on the Legislative Instrument, or to discuss whether your non-cash payment arrangements will fall within the scope of the Legislative Instrument, please contact any member of our National Franchise Team.


1 Australian Securities and Investments Commission, ASIC Corporations (Non-cash Payment Facilities) Instrument, 2016/211, 18 March 2016.

2 Australian Securities and Investments Commission, ASIC Corporations (Non-cash Payment Facilities) Instrument, 2016/211, 18 March 2016, section 5.

3 Ibid, section 6.

4 Ibid, sections 7-9.

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