Buying a fraction of a Queensland property: when it becomes a scheme

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Kooky

Builder of Shaka, the payment router that pays every agent their commission on closing date.

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A full Queensland house or unit is a large purchase, and the idea of buying only a slice of one keeps returning: a few thousand dollars for a small part of a rented property, with someone else finding the tenant and sending the income. Whether the slice is recorded as a unit in a trust, a line in a register or a digital token, the first legal question is the same. It is not a Queensland land law question. It is a question under the Commonwealth Corporations Act, administered by the Australian Securities and Investments Commission (ASIC): has a managed investment scheme been created?

The answer decides almost everything that follows: whether the arrangement must be registered, who may run it, which licence that operator needs and what document an investor must be given. This guide sets out what ASIC's own pages say on each of those points, what the Government's Moneysmart service tells investors to look at in pooled property, and how all of it differs from the older and simpler arrangement of several people going onto a Queensland title together as tenants in common. It describes the rules. It does not rate either way of owning property.

What a fraction of a property usually is in law

Advertising for pooled property tends to speak of owning part of a building. The legal position is usually one step removed. Moneysmart, on its page about property funds, describes the arrangement in plain terms: the investor buys units in an investment run by a professional investment manager, and that manager selects the property, looks after maintenance, collects the rent and manages improvements. Investors receive distributions, which Moneysmart says are typically paid quarterly or half-yearly, and may also make a capital gain.

ASIC's guidance on digital assets contains a short description of the same structure applied to a single building. In its hypothetical, investors' money is used to buy an apartment building, a company goes onto the title as nominee for the investors as a group, the company leases the apartments, and the profit after costs is held in an account for that building. Each investor holds a part interest, but the name on the land register is the company's.

That is the point a Queensland reader should hold on to. In a pooled arrangement, the person who buys a fraction is generally not a registered owner of the house, unit or block of land. What the person holds is an interest in the arrangement that owns it. The Corporations Act has a name for many such arrangements.

The three features that make a scheme

ASIC's page on managed investment schemes describes them through three features. Multiple investors contribute money or money's worth and receive an interest in the scheme. The money is pooled, or used in a common enterprise. And a fund manager, called the responsible entity where the scheme is registered, operates it, while the investors have no day-to-day control.

ASIC's digital assets information sheet, INFO 225, restates the test as three questions and adds detail that matters for property. The first question asks whether people contribute money or money's worth to acquire rights to benefits produced by the scheme, and ASIC notes that the rights can be actual, prospective or contingent, and need not be enforceable. The second asks whether the contributions are pooled or used in a common enterprise to produce financial benefits, or benefits consisting of rights or interests in property. The third asks whether the contributors have day-to-day control over the operation. On that last point ASIC is specific: a right to be consulted, such as a vote on proposals, or a right to give directions, such as entering or withdrawing, is not enough to amount to control.

ASIC's list of typical schemes includes property schemes by name, next to cash management trusts, equity schemes, exchange traded funds, mortgage schemes, agricultural schemes, time-sharing schemes and serviced strata schemes. Its list of things that are not schemes includes debentures, franchises, direct purchases of shares, ordinary banking products such as term deposits, and superannuation funds.

Consider an illustrative case, used through the rest of this guide. An operator proposes to buy a block of six units in a Queensland regional city, divide the investment into 600 equal parts and offer them to the public. The operator will choose the managing agent, approve repairs, decide when to sell and pay net rent to holders twice a year. Buyers of the parts put in money, the money is pooled to buy one asset, the benefit they expect is rent and growth, and none of them runs the building. On ASIC's three features, that reads as a managed investment scheme, whatever the parts are called.

When a scheme has to be registered

Being a managed investment scheme and having to be registered are two separate steps. ASIC's page on how to register a scheme gives the rule from section 601ED of the Corporations Act: registration is required if the scheme has more than 20 members, or if it is promoted by a person who is in the business of promoting managed investment schemes.

The second limb is the one that reaches most commercial offers. An operator whose business is to set up pooled property and offer it to the public does not escape registration by keeping one building to a small number of investors. In the illustrative block of six units, an offer of 600 parts to the public would be expected to pass the 20-member mark, and the operator's line of business would bring the scheme within the rule in any case.

The same ASIC page records an exemption in section 601ED(2) for schemes in which all the interests are issued to wholesale clients. That exemption is why the retail and wholesale line, covered below, matters so much to anyone reading an offer.

A scheme that falls outside the registration rule is not outside ASIC's view. The regulator has a separate publication, Information Sheet 251, on the AFS licensing requirement for trustees of unregistered managed investment schemes.

The responsible entity: who is allowed to run it

The operator of a registered scheme is not a matter of free choice. ASIC's registration page states that the proposed responsible entity must be a registered Australian public company, and must hold an Australian financial services (AFS) licence that authorises it to operate the scheme and to provide the related financial services.

INFO 225 makes the same point for any issuer whose product turns out to be a scheme offered to retail investors: it will likely need an AFS licence authorising it to act as a responsible entity, must comply with the general obligations of a licensee, and must comply with additional obligations that apply only to responsible entities.

Two documents sit at the centre of a registered scheme, and both go to ASIC with the application. The constitution is the scheme's governing document, and ASIC requires the directors to state that it complies with sections 601GA and 601GB of the Act. The compliance plan is the second, defined by section 601HA and signed as section 601HC requires, and the directors' statement must confirm that it complies as well. For a scheme holding one Queensland property, these two documents, not the contract of sale or the title, are where the operator's powers and the investors' rights are written down.

What an AFS licence is, and what it does not say

INFO 225 puts the general rule shortly: a person is generally required to hold an AFS licence to carry on a financial services business in Australia. It then adds a caution that is easy to miss. Holding a licence does not authorise a business to offer any financial product or service it likes. The licensee is limited to the products and services listed in the authorisations on its licence.

The financial services ASIC lists as needing a licence include dealing in a financial product, which covers issuing one and arranging for someone else to deal; providing financial product advice, general or personal; making a market; and providing a custodial or depository service, which means holding financial products, or a beneficial interest in them, on trust for or on behalf of clients.

For a fractional property offer this has two practical consequences. The operator of the scheme needs the responsible entity authorisation. And a separate business that only markets the fractions, or runs the website through which they are bought and sold, may itself be providing a financial service: ASIC notes that a business which assists people to buy or sell a financial product may be dealing, in the way a broker does. The licence question therefore attaches to each business in the chain, not only to the one that holds the property.

From company to registered scheme: the path ASIC describes

ASIC's registration page lays out the order in which an operator moves from an idea to a registered scheme. The sequence matters, because the regulator asks applicants not to lodge a scheme application before they have received at least a draft AFS licence.

None of this involves the Queensland land register. The purchase of the six units in the illustration would still be an ordinary Queensland conveyance, with a contract, transfer duty and a transfer registered by Titles Queensland in the name of whoever holds the property for the scheme. Registration of the scheme and registration of the transfer are two different acts, before two different bodies, under two different laws.

The product disclosure statement and other retail protections

Where a financial product is offered to retail clients, the Corporations Act adds a layer of obligations on top of the licence. INFO 225 lists the main ones: additional disclosure through a product disclosure statement (PDS) and a financial services guide, the design and distribution obligations, internal and external dispute resolution arrangements, and compensation requirements.

The PDS is the document an investor in a retail property scheme is meant to read before putting money in. Moneysmart's guidance on property funds returns to it repeatedly: the fees, the fund's borrowing, its valuation policy and its withdrawal rules are all to be found there.

The design and distribution obligations work from the other direction. As ASIC describes them, an issuer must design its product to be consistent with the objectives and needs of the consumers it is meant for, write a target market determination, and take reasonable steps so that the product reaches the consumers in that target market. Issuers and distributors must monitor outcomes and review the product, and a significant dealing outside the target market must be notified to ASIC within 10 business days.

On disputes, ASIC states that a licensee providing financial services to retail clients must have internal dispute resolution procedures that meet its standards and must be a member of the Australian Financial Complaints Authority. On compensation, the regulator says the primary way to comply is to hold professional indemnity insurance.

One rule applies whether or not any of the above does. ASIC notes that Australian law prohibits misleading or deceptive conduct in trade or commerce, and that the prohibition applies regardless of whether what is being sold is a financial product. A statement about a property's rent, value or prospects made to sell a fraction of it is covered either way: by the ASIC Act and the Corporations Act if the fraction is a financial product, and by the Australian Consumer Law if it is not.

Retail and wholesale: why the line matters

The words "wholesale investors only" on a property offer are not marketing language. They mark the boundary between two regimes.

On the retail side sit registration under section 601ED, a public company as responsible entity, the PDS, the target market determination, dispute resolution and compensation arrangements. On the wholesale side, a scheme whose interests are all issued to wholesale clients is exempt from registration under section 601ED(2), and the retail disclosure and distribution rules do not apply in the same way.

The wholesale side is not unregulated. INFO 225 says that a person operating a wholesale managed investment scheme may still need an AFS licence with the correct authorisations, and must have an appropriate process to ensure that only wholesale clients invest. ASIC adds a general expectation: businesses are expected to know who their investors are in order to justify relying on the exemptions for wholesale or sophisticated investors.

The Corporations Act sets its own tests for who counts as a wholesale client, and ASIC publishes separate guidance on one of them, the certificate issued by a qualified accountant. Those tests are outside the scope of this guide. What a Queensland reader can take from ASIC's material is narrower and practical: an offer limited to wholesale clients may not have been through scheme registration, does not carry the retail layer of disclosure described above, and places on the operator the job of checking that each investor really is on the wholesale side of the line.

What Moneysmart tells investors to look at

Moneysmart's property section sorts property investing into five kinds: buying an investment property directly, property funds, property held through a self-managed super fund, timeshares and land banking. Pooled ownership of a building falls under the second heading, and that is where the Government's consumer guidance on it is found.

Moneysmart first separates listed funds from unlisted ones. A listed fund trades on a public market such as the ASX, and its value is transparent, since the price of a unit can be seen at any time. An unlisted fund is bought directly from the operator. Its value is less transparent, in Moneysmart's words, and it can be difficult to take money out early because the fund may have rules that lock it in. The site states that not all property funds have withdrawal rights, and that even where early withdrawal is allowed an investor may wait some time for the money.

It then lists the matters to check in the fund's disclosure: gearing, interest cover, interest capitalisation, the terms of the fund's borrowing, diversification of the portfolio, the valuation policy, related party transactions, the sustainability of distributions and the net tangible assets behind each unit.

For a scheme that holds a single Queensland building, several of these take a sharp form. Diversification is nil by design, the valuation policy determines how an investor learns what a fraction is worth between purchase and sale, and the withdrawal rules decide whether there is any exit before the property itself is sold. Moneysmart's general suggestion is to consider professional advice from a licensed financial adviser before investing in a property fund.

Where ASIC has addressed fractional property by name

ASIC's clearest published statement on fractional property sits in an unexpected place: its information sheet on digital assets, INFO 225, which the regulator's website shows as last modified on 30 April 2026. Among its hypothetical examples is one headed tokenised real estate, which ASIC describes as a fractionalised real estate investment.

In that example a company in the real estate business sells a group of tokens, each representing a part interest in one apartment building. The company is on title as nominee, leases the apartments and holds the net profit in an account for the building. It may, without being obliged to, buy back some tokens from retained profits. ASIC's view is that the token is likely to be an interest in a managed investment scheme: the money raised is used to buy the property and, with the rent, to maintain and service it, and that is intended to produce a financial benefit for the holders.

The reasoning does not depend on the token. It depends on the pooling of money to buy a building that someone else manages for the holders' benefit. The same analysis would apply to the 600 parts of the illustrative block of six units if they were recorded in a paper register. How ASIC applies its other tests to tokens is a subject of its own.

Buying with friends as tenants in common on a Queensland title

The oldest way to own part of a property needs none of the above. Two, three or four people buy a house or unit together and all of them go onto the title.

Titles Queensland's guide to transferring freehold land sets out how that is recorded. Item 5 of the Form 1 Transfer takes the full names of the people the property is being transferred to, and where there are two or more of them the tenancy must be stated, as joint tenants or as tenants in common. For tenants in common, the shares must be expressed as fractions and not as percentages. The transfer is lodged with a Form 24 property information form, and Titles Queensland notes that every transfer must carry a duty notation, even where no transfer duty is payable.

Take three friends who buy a house on the Sunshine Coast, one contributing half the price and the other two a quarter each. They are named on the transfer as tenants in common in shares of 1/2, 1/4 and 1/4. Each is a registered owner of a share of the land itself. No company stands between them and the title.

Whether the three friends have created a managed investment scheme is answered by the same three features ASIC applies to everything else. They have each contributed money, and the money has been used together to buy one asset. The third feature is where their position usually differs: if they decide together on the tenant, the repairs and the sale, they have day-to-day control of their own property, and there is no operator running it for them.

The answer can shift as the arrangement changes shape. If one of the friends, or an outside organiser, takes over the running of the property for a larger group of passive contributors, the features ASIC describes begin to appear, and ASIC's guidance is clear that a mere right to vote or give directions does not count as control. If the organiser is in the business of putting such groups together, the registration rule in section 601ED applies regardless of the 20-member threshold. Co-ownership on title and a managed investment scheme are not sealed categories; the facts decide.

Kooky, from Shaka

Kooky edits Queensland Estate and builds Shaka, the payment router he made for Queensland property professionals. One payment comes in, and every agent, agency and party in the deal receives their signed share on closing date.

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