A target market determination (TMD) is a lender’s document describing the consumers a credit product is designed for and the conditions for distributing it. For mortgage brokers, it informs product selection and creates reporting duties alongside the assessment of each client’s circumstances.
What a Target Market Determination Sets Out
A target market determination describes a group of consumers with likely objectives, financial circumstances and needs that match a product’s design. It also sets conditions for distribution and explains how the lender monitors whether the product reaches that group.
TMDs are part of the design and distribution obligations (DDO), administered by the Australian Securities and Investments Commission (ASIC). The regime commenced in 2021 and covers home loans and other credit products within its scope. A lender’s TMD gives you the product’s intended market before you recommend or arrange it.
The Design and Distribution Obligations Behind TMDs
The lender designs the product and prepares its TMD. Brokers and aggregators have distributor obligations when their activities involve retail product distribution conduct, such as arranging an application.
Part 7.8A of the Corporations Act 2001 sets the legal framework. Its extended financial-product definition brings credit products into DDO even though ordinary credit contracts do not have product disclosure statements.
ASIC explains the framework in RG 274 Product design and distribution obligations. The guide describes distributors generally and notes that credit assistance can amount to dealing. Its personal-financial-advice examples must not be treated as a blanket exemption for mortgage broking.
ASIC can require information and make stop orders for breaches. Civil penalties and other enforcement consequences also apply. Distribution must stop when the relevant legal prohibition applies, including where a required TMD has not been made.
What a TMD Document Contains
A TMD sets out the target market and the controls for keeping distribution consistent with it. Read these parts together:
- The intended consumers’ likely needs, objectives and financial situation.
- The product attributes that make it suitable for that group.
- Distribution conditions, including permitted channels and restrictions.
- Review triggers that require the issuer to reconsider the TMD.
- Initial and subsequent review periods.
- Complaint reporting periods and other information distributors must provide, including who reports it and when.
For example, a hypothetical variable-rate owner-occupier loan with an offset account could target borrowers buying or refinancing their home. Its intended customers might want flexible repayments and expect to hold savings in the offset account. The document would explain why those features fit that group and the checks used during distribution.
The product description alone does not settle the recommendation. A borrower who wants an offset but keeps little money in it still needs a comparison of its costs and benefits.
What Brokers Must Do When Distributing
Take reasonable steps that are reasonably likely to result in distribution consistent with the most recent TMD. Follow the lender’s distribution conditions and your licensee’s process for checking them.
A practical file process is to:
- Identify the exact loan product and obtain its current TMD.
- Compare the target market and distribution conditions with the proposed application.
- Record the TMD version and the evidence used in that comparison.
- Escalate a mismatch through the lender or licensee’s process before proceeding.
Keep the TMD check beside your responsible lending assessment. Responsible lending considers whether the proposed credit is unsuitable for the individual borrower. Your best interests duty requires a recommendation in that client’s best interests. Being in a target market does not prove either duty has been met.
An outside-market client can still acquire the loan. Section 994E(4) recognises that an outside-market acquisition alone does not establish a failure to take reasonable steps. You still need a sound client-specific reason, compliance with distribution conditions and consideration of possible harm. A file note cannot override a distribution restriction or justify an unsuitable loan.
For an outside-market recommendation, record the mismatch and why the loan meets the client’s needs. Explain the alternatives considered and any lender or licensee escalation. Keep this reasoning with the assessment, not just a tick beside the TMD name.
Reporting to Lenders and Keeping Records
Distributors report product complaints and the other information specified in the TMD to the issuer. Follow the reporting periods in the document. The statutory deadline for routine reporting is as soon as practicable and within 10 business days after the relevant reporting period ends.
A significant dealing outside the target market has a different clock. Notify the issuer in writing as soon as practicable and within 10 business days after becoming aware of it. Assess significance under the applicable guidance and escalation process. Do not assume every mismatch is automatically significant, or wait for a quarterly report when urgent notification is required.
Your aggregator may collect reports and pass them to lenders under an agreed arrangement. Confirm with your own aggregator which reports it sends, the deadlines it uses and what you must submit directly. Retain evidence of what goes to the lender in your name. An aggregator’s reporting service does not remove your own obligations.
Keep complete and accurate distribution records, including the steps taken to comply with the TMD, complaint counts and other required information. Retain the substance and dates of reports, including significant-dealing notifications. ASIC’s RG 274 describes retention for up to seven years under section 1101C. Set the file-retention process to cover that period and any longer applicable licensee requirement.
Your complaint handling process must capture product complaints for DDO reporting as well as resolving the complaint. Include responsibility for these reports in your broader broker compliance procedures.
Finding a Lender’s TMD
Lenders publish TMDs on their websites, usually through a product list or a searchable TMD finder. Search by the exact product name, then open the document that matches the loan you propose to arrange.
| Lender | Where to Look | How to Find the Home Loan Document |
|---|---|---|
| Westpac | Westpac TMD finder | Enter the product name in the search bar. The finder requires JavaScript. |
| ANZ | ANZ target market determinations | Use the home loan section and select the matching product PDF. |
| Macquarie | Macquarie DDO and TMD page | Open Lending products and select Macquarie Home Loans, including the Offset Transaction Account. |
Save the version in force when you provide the credit assistance, including its effective date or version identifier. Lenders review and replace TMDs, so a saved bookmark alone does not establish which version you checked. For a later file review, use the lender’s historical documents or obtain the applicable version from the lender.
TMD vs PDS and Other Disclosure Documents
A product disclosure statement (PDS) gives consumers information about a financial product’s features, costs and risks. A TMD describes the intended market and distribution controls. It guides the issuer and distributors and is not the consumer disclosure document for the loan.
For an ordinary home loan, the client receives credit documents instead of a PDS. A credit guide identifies the credit business and its complaint arrangements. The credit contract contains the loan terms and repayment obligations. Moneysmart’s glossary explains both documents.
A home loan key facts sheet helps the client compare loan costs on a standard basis. Obtain it for the loans being compared and explain relevant features and conditions alongside the figures. Keep the TMD check on the broker file while giving the client the credit documents needed to understand and compare the proposed loan.
