Wholesale vs sophisticated vs retail investor: the tests in plain English

Wholesale and sophisticated investors are largely the same people under different chapters of the Corporations Act. You generally qualify if you invest $500,000 or more in an offer, or hold a qualified accountant’s certificate showing net assets of at least $2.5 million or gross income of at least $250,000 in each of the last two years. Everyone else is retail. That $500,000 figure is a legal eligibility test, not the amount you have to put into each loan; once you qualify, you choose how much to contribute to each loan, from $100,000 to several million dollars.

The distinction matters because many investments, including co-funding secured loans with HomeSec Business Finance, are offered only to wholesale investors. HomeSec, an Australian private lender founded in 2004, invites wholesale and sophisticated investors to co-fund some of its short term loans. This guide explains the tests without the legalese.

What is the difference between wholesale, sophisticated and retail investors?

The Corporations Act uses different words in different chapters.

• Sophisticated investor is the Chapter 6D term. Chapter 6D governs offers of securities, such as shares and debentures, and sets out when an offer can be made without a prospectus. The main tests are in section 708.
• Wholesale client is the Chapter 7 term. Chapter 7 governs financial products and financial services, and sets out when a product disclosure statement and other retail protections are required. The main tests are in section 761G.
• Retail investor or retail client is anyone who does not meet a test.

As ASIC explains, a person holding a qualified accountant’s certificate is a sophisticated investor for Chapter 6D and a wholesale client for Chapter 7. In everyday use, most people and providers use the terms interchangeably.

What are the tests?

The table sets out the main tests side by side.

Chapter 7 also treats a product acquired for use in connection with a business that is not a small business as wholesale.

You only need to meet one test. For most private investors, the practical routes are the accountant’s certificate or investing $500,000 or more.

What counts towards the $2.5 million net assets test?

Net assets means everything you own less everything you owe. That includes property, shares, cash, business interests and other investments, minus mortgages and other debts.

Two points often surprise people.

The family home counts. The parliamentary committee’s report confirms the assets test currently includes all assets in a person’s name, including the principal residence. Some submitters proposed excluding it, but that change has not been made.

Companies and trusts you control can count. ASIC’s guidance confirms the net assets and gross income of a company or trust controlled by the person can be included. ASIC also notes a trustee company with fiduciary duties cannot meet the control test, so a trust’s assets are not automatically attributed to its trustee.

We cover the certificate itself in how to get an accountant’s certificate.

Why have so many more people become wholesale investors?

Because the thresholds have never moved. The $2.5 million and $250,000 figures were set in 2001 and have not been indexed for inflation, wage growth or house prices.

According to Gilbert + Tobin’s summary of the inquiry, 1.9% of Australian adults qualified as wholesale clients in 2001. By 2024, the figure was about 18%, and it was projected to reach 43.6% by 2041 if nothing changed.

Much of that growth comes from property. A couple who bought a house decades ago in Sydney or Melbourne may now clear $2.5 million in net assets on the value of their home alone.

Are the thresholds going to change?

Not for now. In February 2025, the Parliamentary Joint Committee on Corporations and Financial Services recommended no immediate increase to the financial thresholds. It suggested a periodic review mechanism and more objective criteria for the experienced investor test instead.

The government tabled its response in March 2026. As at September 2026, the $500,000, $2.5 million and $250,000 thresholds remain as they were.

The debate is not over. Some advisers argue the tests measure wealth rather than knowledge, and industry groups continue to call for reform. If you are a wholesale investor today, you remain one under the current rules.

What do people most often get wrong about the tests?

A few misunderstandings come up again and again.

“My certificate lasts forever.” It does not. ASIC confirms certificates are valid for up to two years after they are issued. After that, you need a new one, based on your position at that time.

“One good year of income is enough.” The income test needs gross income of at least $250,000 in each of the last two financial years, not an average and not one strong year.

“Wholesale is about how much I know.” For most people it is not. The certificate and product value tests measure money, not experience. Only the experienced investor route looks at your knowledge, and that requires a licensee to assess you.

“Being wholesale means I don’t need to read the documents.” The opposite is true. Wholesale offers usually come without a prospectus or product disclosure statement, so what you read, and the questions you ask, carry more weight. The glossary explains the terms you will meet in a loan pack.

“My SMSF qualifies because I do.” Not necessarily. Super funds are treated differently, as explained below.

What does being a wholesale investor mean in practice?

It means you can be offered investments that are not available to retail investors, without a prospectus or product disclosure statement. It also means some retail protections do not apply to you.

That is not a reason to take less care. It means the diligence is yours to do. For a co-funded loan, that is the purpose of the due diligence pack: HomeSec sends you the details of the property, the valuation, the LVR, the borrower, the exit and the rate, and you decide whether to invest. Our page for wholesale investors explains how this works.

How do the tests apply to companies, trusts and SMSFs?

Many investors hold their wealth in a company or family trust. As above, a certificate can reflect the assets and income of a company or trust controlled by a qualifying person, and the investing entity can then rely on it. Your accountant will confirm how to word it.

Super funds are different, and more contested. When a financial service relates to a superannuation product, SuperConcepts explains that the Act looks to whether the fund itself has net assets of at least $10 million, and AFCA has applied that test broadly to SMSFs. We explain the detail in can an SMSF be a wholesale investor?

How do you qualify to co-fund with HomeSec?

Co-funding is open to wholesale and sophisticated investors, who choose how much to put into each loan. You can qualify with an accountant’s certificate, no more than two years old, showing net assets of at least $2.5 million or gross income of at least $250,000 in each of the last two financial years.

Investors can be individuals, companies, trusts, SMSFs, family offices, or based overseas. If you’d like to check whether you qualify and see what a loan pack looks like, register your interest and our Funding Manager will be in touch.