Opinions

CPA

Are you in or out?

Keddie Waller

With a little over 12 months until the accountants’ exemption will be removed, it is time for all accountants to act or otherwise risk not having the right advice solution in place for their practice and clients come 1 July 2016.

Waiting until the exemption is repealed is not an option. In fact, it only limits your options.

However, there still seems to be some confusion over what this reform really means and this is preventing some accountants from deciding how they will address this reform.

So what’s actually changing?

On 1 July 2016, regulation 7.1.29A of the Corporations Regulations, commonly referred to as the accountants’ exemption, will be repealed. This means if you want to provide a recommendation to a client to set up or wind up an SMSF from 1 July 2016, you must be appropriately licensed under the Australian financial services licence (AFSL) regime.

Just as important as what is changing though, is what is not changing.

Appropriately qualified accountants can continue to provide administration, compliance, audit and tax advice and services in respect of SMSFs without being licensed under the AFSL regime. It is important to refer to your professional accounting body for further guidance as there are disclaimers and other requirements that must be met to rely on these exemptions.

Given this, the first step is to decide whether you need to be licensed.

When making this decision you should consider not only what advice and services your practice currently provides, but what you would like your practice to be able to provide in the future. Factors such as technology and offshoring will continue to have a significant impact on traditional accounting services. Changing client needs will also drive further demand for advisory services. You must ask yourself what your practice will look like in five years’ time.

You should also consider the differences between providing advice under the accountants’ exemption and providing financial product advice under the AFSL regime. For example, when providing financial product advice, you must satisfy the statutory best interest duty implemented as part of the Future of Financial Advice (FOFA) reforms. There are also mandatory compliance and disclosure obligations.

If you decide you do not require licensing, it is important you and your staff clearly understand what advice and services you can provide without being licensed, not only in regards to SMSFs but all financial products. Your practice will still also need a financial planning solution, such as referring clients to a licensed financial planner, recruiting a financial planner or setting up a joint venture arrangement.

If you decide you need to be licensed, you have two options to consider: become an authorised representative of an existing AFSL holder or apply for your own limited licence.

Each of the options has its own advantages and disadvantages.

As an authorised representative, you can provide financial product advice, while the licensee is responsible for ensuring compliance with the AFSL obligations. Depending on the scope of advice, you may also be able to provide specific product recommendations beyond the SMSF. Importantly, the licensee will set the training requirements, so it is a good idea to check with any prospective Australian financial services licensee what Regulatory Guide (RG) 146 training they require.

On the other hand, holding your own limited AFSL means you are responsible for compliance with the licence obligations. However, it also allows you to maintain your professional independence, something many public practitioners deeply value. It may also provide a practical solution to rural members to continue providing advice to their communities.

Importantly, you can only apply for the limited AFSL under the streamlining provisions if you are an accountant holding a public practice certificate with one of the professional accounting bodies. You must still also complete the required education and training (RG 105 and RG 146) as well as meet a range of other requirements. Ask your professional body what information and resources it has available to help you understand these requirements and apply for your own limited AFSL.

The most important thing to do today if you need to be licensed in some capacity is start your training.

The streamlining provisions available during the transition period end 30 June 2016. No exceptions.

So it’s time decide if you are in or you are out.

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