Avoid legal advice, but document its request

accountants legal advice

Accountants should document any assistance they give to SMSF clients to avoid claims they provided legal advice, an SMSF legal expert has warned.

Accountants need to fully document any conversations with clients that may be considered legal advice and be clear in those exchanges they are not providing advice, but rather informing them of what action should be considered, an SMSF legal expert has advised.

DBA Lawyers special counsel Bryce Figot said accountants were often the first point of contact for clients when dealing with issues related to SMSFs and whether they should seek legal advice, but warned they should not stray into that advice themselves.

Whenever an accountant is preparing documentation it can start getting close to legal advice, especially if they are preparing things like resolutions or having a gatekeeper role in communications,” Figot said today during a presentation at the Chartered Accountants Australia and New Zealand National SMSF Conference Online 2020.

“A trustee may say to their accountant ‘you are my puppet and I pull the strings because I don’t have the skills’ or ‘this is the decision of the trustee and I direct you to type it up, you are a mere scribe’.

“If that happens, it is reasonably clear the accountant is not providing legal advice, but they also have to prove that is what happened.”

He said accountants needed to be cautious at this point because if their ‘fingerprints’ were on the document, such as the accountant being a witness, shaping the language or producing the document in-house, it would be harder to prove they had no influence.

“The critical thing is the accountant keeps good file notes to say they did not give legal advice but recommended legal advice if necessary, and if the accountant types up a document, they record they did so at the direction of the trustee and keep file notes to prove it,” he said.

He noted some accountants had limited time to do so and were also reluctant to charge clients for keeping these file notes, but recent court cases have demonstrated the need for adequate file notes when dealing with SMSFs.

“This is hard to do, but when the ship hits the sand and a judge reviews your files, they go through them with a fine-tooth comb and scrappy little file notes will get closely analysed,” he pointed out.

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