The wholesale investor test

Why does the wholesale investor test matter for a venture fund?

It decides whether a fund can offer your client an interest without a Product Disclosure Statement (PDS) or prospectus, which the Corporations Act requires for retail clients.1 Most venture funds, including most ESVCLPs, are offered only to wholesale investors under an information memorandum, so a client who meets no test generally can't invest.

Section 708 covers offers of securities such as shares. Section 761G covers other financial products, such as interests in a fund, and defines a wholesale client. The thresholds are the same in both.1,2

What are the ways a client can qualify as a wholesale investor?

An individual has five main routes. A client only needs one, and each needs its own evidence.

Corporations Act sections 9, 708(8) to (11), 761G(7) and 761GA, and Corporations Regulations 6D.2.03, 7.1.18, 7.1.28 and 7.6.02AB to 7.6.02AF.

If your client puts $500,000 or more into the fund, they're a wholesale client for that product whatever their wealth.2 For shares, amounts the issuer lent the investor are ignored when adding up the $500,000.1

Under the individual wealth test, your client gives the fund a copy of a qualified accountant's certificate before investing. The Act says the certificate must be no more than six months old, but the regulations extend that to two years.1,2,4

A person who has or controls gross assets of at least $10 million, including assets held by an associate or under a trust they manage, is a professional investor and needs no certificate.1,2

The sophisticated investor route (section 761GA, or section 708(10) for shares) is the only one that turns on experience rather than money. An AFS licensee has to be satisfied that the client's past experience lets them assess the product's merits, value and risks, their own information needs and the adequacy of the information they've been given. The licensee gives written reasons, and the client signs an acknowledgement that they won't get a PDS or the other protections a retail client would.1 It doesn't apply to products acquired for use in a business.

Where the investor is a company, trust or SMSF, which person or entity has to meet the test is worth confirming with the fund before your client applies. Venture in an SMSF covers the other rules for super funds.

What counts toward the $2.5 million net assets?

Everything your client owns less everything they owe; the test doesn't carve anything out. The family home counts, as do investment properties, shares and business interests, net of the debt against them.1 ASIC leaves how net assets and income are measured to the accountant's professional judgement, so whether super counts is worth confirming with the accountant signing the certificate.4 Excluding the family home was argued for during the 2025 inquiry but not adopted.5

Your client can also include the net assets of a company or trust they control. The same goes for gross income under the income test. "Control" has the meaning in section 50AA of the Act, which looks at the capacity to decide the entity's financial and operating policies.1,2

Points that come up often:

• The income test needs $250,000 in each of the last two financial years. One big year from a bonus or a property sale doesn't satisfy it.
• The test is about the person the certificate is for. A couple can't simply pool their wealth on one certificate, although assets held through a company or trust that person controls can count.
• For products other than shares, the wealth route doesn't apply where the product is provided for use in connection with a business.1

Who can sign a wholesale investor certificate?

Only a qualified accountant, which ASIC defines by legislative instrument. ASIC remade the instrument in September 2026 with minor changes, and it sunsets on 1 October 2036.6

In Australia, a qualified accountant is a member of CPA Australia, Chartered Accountants Australia and New Zealand or the Institute of Public Accountants who:6

• is entitled to use that body's post-nominals
• is subject to its continuing professional education requirements
• confirmed in writing at their last membership renewal that they comply with those requirements.

Members of six named overseas bodies can also certify, if they have at least three years of practical experience and the client lives in the same country as them.6

An accountant signing one is making a statement about the client's finances at a point in time, so it's worth seeing the working (asset valuations, loan balances, tax returns) and keeping a copy on file. Many funds supply their own certificate form; ask for it before drafting one.

Did the 2025 inquiry change the thresholds?

No. The Parliamentary Joint Committee on Corporations and Financial Services reported on the wholesale investor and wholesale client tests in February 2025. ASIC had argued for higher thresholds; the committee was not persuaded by the examples of harm put to it and did not recommend an increase.3,5

It made two recommendations: a mechanism to review the tests periodically, and replacing the subjective parts of the sophisticated investor test with objective criteria for knowledge and experience, after consultation.5 Treasury's 2023 review of managed investment schemes cited research estimating that 16% of Australian adults met the wealth thresholds in 2021, up from 2% in 2002, with the thresholds unchanged since they were introduced.7

As at October 2026 the law still sets $2.5 million of net assets and $250,000 of gross income.2 Given the long debate, it's worth checking for changes before relying on a certificate issued under the current figures.

What happens if a client is wrongly treated as wholesale?

The client loses protections they were entitled to: a PDS or prospectus, and a target market determination under the design and distribution obligations. Advice and compliance notes covers the obligations on your side.

For the fund, an offer to a retail client without the right disclosure is a breach of the Act, and in proceedings over most financial products the client is presumed to be retail unless the issuer shows otherwise.1 That's why funds ask for the certificate up front and keep it.

For the adviser, the risk sits in the paperwork. A certificate signed without checking, or a sophisticated investor assessment that doesn't hold up, can resurface years later if the investment goes badly. How much to allocate and Venture in a portfolio cover the sizing side.

Meeting the test also says nothing about whether venture suits your client. A client with $2.5 million of net assets, most of it in their house, can qualify and still have no business locking up $250,000 for ten years.

Frequently asked questions

Talk to us about Fund III

Tall Order is a Melbourne seed fund. Fund III is a registered ESVCLP for wholesale investors. Justine Lum, our Head of IR, works with advisers and their clients.

Contact Justine Fund III