Michael Miller

Guidance from ASIC has suggested planners should feel comfortable to advise on the Centrelink Home Equity Access Scheme, and it is  unnecessary to have an Australian credit license to give advice on the scheme.

The HEAS, previously known as the Pension Loans Scheme since last year, is a Centrelink scheme launched in 1985 with similar traits to a reverse mortgage. Like a reverse mortgage, it allows retirees to take out a loan using equity in their housing or other real estate as security.

Capital Advisory director Michael Miller tells Professional Planner he sought guidance from the regulator as the area was considered a “no-go area” for financial planners.

“The scheme – it’s effectively like a reverse mortgage – except from Centrelink,” Miller says.

“In terms of being a credit product, there were some whispers of concern that this might be assessed as a credit product. This means that without having a credit license you couldn’t give advice on it and none of us [advisers] hold credit licenses.”

Miller also points out that there is no commission paid on the HEAS and the borrowing amounts are too small for there to be any incentive if there was.

Additionally, the scheme is rarely used in isolation and will generally be used as part of a retirement income plan.

All in the clear

Miller contacted the office of Labor MP Andrew Leigh, who was the member where Miller’s previous office was located. Leigh’s office forwarded the query to ASIC’s office.

In a letter to Miller, ASIC senior executive leader for credit and banking Tim Gough said the scheme is available to senior Australians who meet the Age Pension age, residency requirements, and own real estate in Australia.

“It therefore allows both pensioners and non-pensioners alike to access the Scheme and money as an income stream in addition to small lump sum amounts,” Gough said.

“The operation of the Scheme is provided for under Division 4 of Part 3.12 of the Social Security Act 1991(Cth) and is a debt owed by the recipient to the Government.”

Because the scheme is provided under statute and not under a contract, the debts are not considered credit contracts or regulated under the National Credit Act.

“We consider that financial advisers can advise on the scheme without requiring an ACL, notwithstanding their functional equivalence to reverse mortgages that are regulated under the National Credit Act.”