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Accounting, Financial Planning, Regulation

Gross incomprehension over accountants’ exemption

Calls for the return of the accountants' exemption has unveiled confusion around the original framework.

Recent lobbying efforts for the reinstatement of the accountants’ exemption have revealed many practitioners have failed to understand the original framework, according to an SMSF industry body.

“What’s become increasingly apparent – both through the recent coverage and commentary, from my own first-hand experience speaking with accounting practitioners – is that there’s a complete lack of understanding about how the former exemption used to operate,” Self-managed Independent Superannuation Funds Association (SISFA) managing director Michael Lorimer told selfmanagedsuper.

“So any argument to restore it on the basis that that will fix what’s perceived as a problem [under the limited licence environment] is crazy, and that’s not withstanding the fact that I don’t think policymakers or regulators have any appetite to go back to that regime.

“There’s an inference that the previous accountants’ exemption allowed unlicensed accountants to provide basic SMSF services for their clients. That is not what it did.”

Lorimer clarified the accountants’ exemption simply provided a carveout from the need to have a licence for accountants who were recommending people establish or wind up an SMSF.

“That’s all it allowed them to do. It didn’t allow them, for example, to recommend a client to commence a pension, it didn’t allow them to make specific recommendations around contributions or anything like that,” he said.

“It was only around setting up an SMSF, acquiring an interest in an SMSF or disposing of an interest in an SMSF, that is, winding it up. It was extremely limited in its operation.”

Furthermore, if the accountant was recommending, for example, an SMSF to be set up and they were relying on the exemption, they needed to provide the client with a written statement that they were not licensed to provide financial advice and recommend to possibly seek advice from a suitably qualified adviser, he noted.

“I can assure you that in the vast majority of cases where that was purportedly being relied on, that written qualification was never provided,” he said.

“Accountants who aren’t licensed under the Corporations Act, but who are, for example, chartered accountants or CPAs (certified practising accountants) or members of the IPA (Institute of Public Accountants) with practising certificates and in many cases tax agents are able to provide traditional administration and compliance-related services to SMSFs in spite of the previous accountants’ exemption and in spite of any new limited licensing regime.

“What I’m concerned about is why so many accountants think they still need to have some sort of protection to provide basic compliance services.

“If all they’re doing is preparing financial statements, arranging audits, filing tax returns for SMSFs, providing factual information around super laws and contribution limits, they don’t need to go anywhere near the Corporations Act – they are adequately protected.”

He said he believes the debate about the exemption would be more constructive if the original framework was understood in the first place.

It was the role of the professional accounting bodies to re-educate their members about what they can and cannot do in the SMSF space, he pointed out.

“If there’s going to be any energy applied in this area, it would be to get people properly educated about what they can and cannot do, in detail, then they can make an informed decision about whether they can safely operate without the need to consider licensing,” he said.

“Or, if they’re steering more toward providing proactive financial product advice, even if it is limited to the SMSF space, they need to understand that means they have to go down the limited licensing path or even the full licensing path.

“It needs to be provided in an easy format for time-poor accountants to digest.”

He added the Australian Securities and Investments Commission published an update in April to its guide, “Information Sheet 216: AFS licensing requirements for accountants who provide SMSF services”, which sets out basic principles to apply to understand whether advice falls within the licensing exemption.

It also includes examples to illustrate how the exemption works.

“When I read the updated guide, I thought it was good and it made sense. It made pretty clear what the regulator’s position is in relation to this and I don’t think it could be made any clearer,” Lorimer said.

“A lot of conversations I’ve had with accountants have made it quite clear that they never really properly understood how the exemption used to work and also don’t understand the new licensing world.”

The accountants’ exemption was removed on 1 July 2016.

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