Opinions

CPA

Not licensed? What advice and services can you provide?

With only weeks remaining until the accountants’ licensing exemption is repealed on 1 July, the focus has rightly been on the requirements for recognised accountants to become licensed if they wish to be able to recommend a client should establish or wind up an interest in an SMSF after 30 June. Those who are not licensed may need a solution in place by 1 July, so they may need to consider setting up a referral arrangement or a joint venture with a practice that is licensed and fits the culture and needs of their clients.

However, what hasn’t been discussed in detail are the exemptions that will continue to remain in place after 30 June. These exemptions permit advice and services in relation to factual advice, taxation advice, traditional accounting activities, broad asset allocation advice and referrals.

Factual information

It may seem obvious that you do not need to be licensed to provide factual information to your clients. However, care must be taken to ensure the client understands you are not intending to imply any recommendation or opinion about a financial product. Factual information should be objective and ascertainable.

A communication of factual information may still be considered financial product advice if the information is presented in a way that is intended or could be reasonably regarded as intending to influence a client in making a decision about a financial product or class of financial product.

Therefore, when providing factual information you must ensure you clearly inform your client up front that you are providing factual information only and the information you are providing is not intended to imply any recommendation or opinion about a financial product.

Taxation services

While the provision of tax advice is regulated under the Tax Agent Services Act 2009, an additional exemption is provided under regulation 7.1.29(4) of the Corporations Regulations 2001.

Regulation 7.1.29(4) states advice can be provided in relation to financial products, provided:

•  the advice is in respect of the taxation implications of the financial product,

•  you do not receive a benefit, other than the fee charged for the advice, and

•  you provide the required disclaimer.

Importantly, tax advice must not be used as a pretext for providing financial product advice.

This means the advice must be limited only to the taxation consequences of the financial products or strategy and cannot be used to recommend particular financial products.

Traditional accounting activities

Regulation 7.1.29 of the Corporations Regulations provides exemptions to the licensing requirements for certain activities that broadly cover areas such as business planning, compliance, financing of assets, share valuations and superannuation.

The activities permitted under this sub-regulation are limited and subject to a threshold test, meaning the activities can only be provided as long as any financial product advice is provided in the ordinary course of those activities and is reasonably necessary to, and an integral part of, that activity.

Broad asset allocation advice

A general exemption is provided from the licensing requirements for broad asset allocation advice under regulation 7.1.33A of the Corporations Regulations. However, it is important to take care that when providing advice under this exemption, no recommendation or statement of opinion is made that relates to specific financial products or classes of financial products.

Referrals

There is an exemption from the licensing requirements for referring a client to an appropriately licensed third party for financial product advice. In all circumstances any benefit that may be received must be disclosed. Accounting Professional and Ethical Standard (APES) 110 also requires written disclosure to be provided to the client. Further, in some instances the receipt of referral fees or commissions may create self-interest threats that must be evaluated in accordance with the framework of APES 110.

If you are not going to be licensed, make sure you take the time to understand what advice and services you can provide.

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