Opinions

CPA

Accountants and SMSFs

There has been much commentary about what SMSF advice accountants are providing following the removal of the accountants’ exemption last year amid concerns the take-up of the limited licence hasn’t been as high as expected.

Firstly, accountants have had a number of solutions they could turn to in order to satisfy their clients’ SMSF advice requirements. While the limited licence is one option, accountants have also become authorised representatives of full Australian financial services (AFS) licensees, obtained an AFS licence in their own right if they’ve satisfied the experience requirement, entered into referral arrangements with financial planners, or brought planners into their practices.

Secondly, it’s important to remember the only thing that changed on 1 July last year was the removal of the Corporations Regulation 7.1.29A, which permitted recognised accountants to provide advice on the establishment or winding up of an SMSF. Accountants continue to provide a broad range of services to SMSFs as permitted under the Corporations Regulations, as highlighted in the Australian Securities and Investments Commission’s (ASIC) recent Information Sheet 216 “AFS licensing requirements for accountants who provide SMSF services”.

Accountants can provide factual information, that is, information that is objective, ascertainable and cannot be questioned. Examples include factual information on the contribution caps, the benefits and disadvantages of consolidating superannuation accounts, salary sacrifice arrangements and superannuation, choice of fund, eligibility to move into pension phase, the minimum pension payment factors relevant to a client’s age, and the upcoming superannuation changes from 1 July 2017.

Accountants as registered tax agents can also provide advice under regulation 7.1.29 in respect of the taxation implications of a financial product, provided they do not receive a benefit as a result of their client acquiring the product other than the fee they receive from the client for the advice, for example, the taxation implications of commencing a salary sacrifice arrangement, making concessional or non-concessional contributions, or the capital gains tax implications of selling assets.

The important distinction with the tax advice exemption is that the advice must be on the taxation implications of a financial product. A financial product recommendation cannot be made based on the taxation implications. You can tell a client about the taxation implications of salary sacrifice into super, but you cannot tell them to salary sacrifice contributions into super due to the tax benefits.

Accountants can also provide limited superannuation advice. Advice can be provided to the trustee on establishing, operating, structuring, valuing or winding up an SMSF. Similarly, advice can be provided on the process of winding up or exiting an SMSF. This includes such things as the steps to be taken to establish or wind up an SMSF, how to add new trustees and members, the different fund structures available, and how to process rollovers.

Accountants can also provide advice for the sole purpose of, and only to the extent reasonably necessary for, ensuring compliance with superannuation legislation, such as the Superannuation Industry (Supervision) Act and regulations, and the superannuation guarantee (SG) requirements.

In all cases, recommendations cannot be made to establish or wind up an SMSF or acquire or dispose of an interest in an SMSF. Importantly, when advice is provided under these exemptions, appropriate disclaimers must be provided that the person providing the advice is not licensed to provide financial product advice and the client should consider obtaining advice from an AFS licensee before making a decision about a financial product.

In addition to these exemptions, accountants can also provide asset allocation advice under Corporations Regulation 7.1.33A. Advice can be provided on what proportion of funds should be allocated across shares, debentures, deposit products, life insurance products, superannuation and other assets. However, recommendations cannot be made on a particular asset or class of asset.

ASIC has also reiterated that if you hold an AFS licence or are authorised under an AFS licence, you cannot rely on any of the exemptions provided under Corporations Regulation 7.1.29 to provide unlicensed advice, that is, you cannot selectively take off your licensed adviser’s hat whenever you choose to rely on an exemption to provide unlicensed advice in an area you are not authorised to provide advice in or because it is convenient to do so. ASIC’s view is once you are licensed you are licensed and are always operating under your AFS licence or authorisation.

The only exception to this exemption is registered tax agents holding a limited AFS licence can rely on the tax advice exemption to provide tax advice on products or class of products they are not authorised to advise on.

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