Relying on exempt activities not ideal

Accountants who have decided not to participate in the Australian financial services licensing regime when servicing SMSF clients because they are engaging in activities that are exempt from this regulation framework need to be cautious due to anomalies existing in the rules, a specialist lawyer has said.

Activities considered exempt under the licensing system include the provision of taxation advice, traditional accounting services and broad asset allocation advice.

DBA Lawyers special counsel Bryce Figot warned delegates at his firm’s latest SMSF strategy seminar that reliance on providing taxation advice as a legitimate activity that did not require a licence was problematic.

“If we’re relying on things like taxation advice, what sort of important taxes does it not cover? State taxes, for example, stamp duty and land tax,” Figot noted.

“So if I’m trying to bring something under taxation advice, particularly something like business real property into super and I fail to mention stamp duty or if I do mention stamp duty, that’s not covered here because it’s a state tax.

“And if I don’t mention stamp duty, I may well be negligent.”

He pointed out there was further complication for accountants who had entered the licensing environment, that is, they had an Australian financial services licence (AFSL), but still wished to rely on this exemption.

“According to the corporations law itself if you are relying on providing taxation advice as an exempt activity, you have to give a disclaimer that you haven’t entered the licensing regime,” he said.

“This may not be factually true. You might be licensed, but you may not want to use that licence.”

A safer alternative to relying on engaging in activities that were exempt to service SMSF clients without holding an AFSL was for accountants to offer factual advice and/or execution services only to operate within the law, he said.

Regardless of which option accountants chose if wanting to practice without an AFSL, he suggested there was a method to better protect themselves from potential litigation.

“How do you win a war against all this extra legislation? With more disclaimers,” he said.

He suggested disclaimers should make it clear only factual information had been provided with the proviso for the client to make further contact again so the accountant could further clarify their position if disputed.

Even if there was confusion and the client made no further contact, the disclaimer would at least provide the accountant with an audit trail as evidence of his position on the matter, he added.

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