From 1 April 2020 providers of funeral expenses facilities will be required to hold an Australian financial services licence and comply with relevant obligations, unless the facility does not meet the definition of a ‘financial product’ in section763A or section 764A of the Corporations Act.

A funeral expenses facility is a scheme or arrangement for the payment of money when a person dies, for the purpose of paying all or part of the expenses of, and incidental to, the person’s funeral, burial or cremation.

Facilities that provide these kinds of benefits may be:

• insurance products (either insurance contracts that give a right to payment of a sum on the death of a person, or some other kind of life policy within the meaning of the Life Insurance Act 1995), or
• a facility that is not insurance, but enables the client to manage financial risks relating to funeral services or to make a financial investment for the purpose of providing funds for a funeral service.

If a facility entitles the client to a sum of money to use for funeral and related expenses, rather than providing the funeral services themselves, it will be treated as a ‘funeral expenses facility’, which may be a financial product, and not as a ‘funeral benefit’ which is not a financial product: see s765B.

Prepaid funeral agreements with funeral service providers are not financial products.

There is a specific exemption for funeral service providers (such as funeral directors) who engage in financial services in the course of distributing funeral expenses policies that are issued by friendly societies: see reg 7.6.01(1)(ta) and 7.6.01(7): The Treasury Laws Amendment (Financial Services Improved Consumer Protection) (Funeral Expenses Facilities) Regulations 2019.

Until 1 April 2020, funeral expenses policies were exempt from being a ‘financial product’ under the Corporations Act 2001 and the Corporations Regulations.

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Author: David Jacobson
Principal, Bright Corporate Law
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The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.