Be cautious around SMSF loan discussions

SMSF loan refinancing

Accountants have been warned to tread lightly when discussing SMSF loan refinancing and be certain to keep their advice within tight limits.

Accountants with SMSF clients have been warned to move carefully when providing advice around rent relief stemming from COVID-19 particularly when they start to look at loan refinancing in the coming months.

Holley Nethercote general manager Kath Bowler said accountants who were not licensed but who worked with SMSF clients could hold conversations about the impact of the government’s relief options on meeting the fund’s liabilities if the fund was receiving less income as well as how to handle a loan for business real property but had to contain those discussions to strict limits.

“In response to the question of whether you can give advice on these issues, I will give a lawyer-type answer, and that is maybe you can do that,” Bowler said as part of a recent webinar presented by the legal firm.

“In terms of fund’s ability to meet liabilities, any advice will be around whether someone is giving information or guiding their client on pension options and that will be critical thing.”

Bowler said this distinction also applied to advice related to a loan within the SMSF and pointed to guidance provided by CPA Australia in its Financial Advice and Regulations which addressed the issue of whether an accountant can recommend a client borrows funds to invest in an established) SMSF.

“If we look behind that question, we see that as long as an accountant is not advising on the SMSF or advising on whether to hold a property in the SMSF, then that is not giving advice that requires a licence.

“If you are advising on borrowing, as long as its not a margin loan, then it is not a financial product and if you are advising on property, that is not a financial product either.

“It is a contained conversation around the borrowing arrangements and rental arrangements of that property and not the structure it is held in,” Bowler added.

SmarterSMSF chief executive Aaron Dunn, who also spoke during the webinar, said these type of discussions would become more prevalent as SMSFs looked to make changes to their loans due to the ongoing nature of the COVID-19 pandemic.

“These type of conversations are one of the most common things we will see over next six months as SMSF clients decide whether they should be refinancing their loan arrangements and restructuring those loans,” Dunn said.

“In that instance, there is nothing that should trip you up going through refinancing process with clients because they will need to restate some terms and conditions of the loan because they have had that period of relief with repayments.”

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