With increased compliance costs, high continuing education requirements and a lack of use, accountants are rushing to give their limited licences back. Will 2020 be their last? If so, what does this mean going forward?
The limited licence regime introduced for accountants following the removal of the accountant’s exemption in 2016 and became an expensive, inefficient, unloved and underused compliance burden. Under a limited licence, accountants were authorised to provide:
- Financial product advice about:
- self-managed superannuation funds (SMSFs)
- a client’s existing superannuation holdings, to the extent required for making a recommendation to establish an SMSF or providing advice to a client on contributions or pensions under a superannuation product
- Class of product advice about:
- Superannuation products
- Simple managed investment schemes
- General insurance products
- Life risk insurance products
- Basic deposit products
- Arranging to deal in an interest in an SMSF
One of the misconceptions of the limited licence regime was that you needed to be licenced to talk to your clients about superannuation. This is not true. In fact, being licenced may expose your firm to more risk. Being licenced requires that for all advice provided in relation to your client’s superannuation be provided through your limited AFS licence. Some of these obligations include:
- Providing a Financial Services Guide
- Best interests’ duty and related obligations
- Preparing and providing a statement of advice
- Record Keeping obligations
- General advice warning
- Conflicted remuneration
- Ongoing fee arrangements
On top of this you may also not be covered by the accountants $2m professional standards scheme as you will be covered under your licensee’s insurance policy.
So what can you do without a limited AFS licence?
Below is ASIC’s guidance on what you may and may not do. You may be surprised that you can work comfortably in the ‘May Do’ column.
|TYPE OF ADVICE||WHAT YOU MAY DO||WHAT YOU MAY NOT DO|
|Establishing, operating, structuring or valuing an SMSF, including advice and assistance on administrative and operational issues, and the process of winding up or exiting an SMSF||
You may provide advice on establishing, operating, structuring or valuing an SMSF, as long as you give your client the appropriate warnings. This includes:
|You may not recommend that your client acquires or disposes of an interest in an SMSF.|
Asset allocation and investment strategy
You may provide a recommendation or statement of opinion on how your client should distribute their available funds among different categories of investments
|You may not advise your client to make particular investments through the SMSF|
|Tax advice on SMSFs and other financial products||You may provide tax advice on financial products, such as an interest in an SMSF and underlying investments held by the SMSF, as long as you do not receive a benefit as a result of your client acquiring a financial product (or a financial product that falls within the class of products) mentioned in the advice and you give your client the appropriate warnings|
Tax agent and BAS services
|If you are a registered tax agent or BAS agent, you may provide advice that is given in the ordinary course of the activities of such an agent and that is reasonably regarded as necessary part of those activities|
|Referring clients to an AFS licensee or representative||You may refer clients on to an AFS licensee or representative for financial product advice, as long as you make the appropriate disclosures|
What about the accountant’s exemption?
This was a very general exemption that ceased in 2016 that allowed accountants who had practicing certificate an exemption from being licenced to continue to provide financial advice about superannuation to their clients. In November 2019 the three main accounting associations (ANZCA, CPA and IPAA) joined forces on a working group to establish a better licencing solution. This group also released a statement that they will not be supporting a return to the Accountant’s exemption. This looks unlikely to return.
Tax agent exemption example from ASIC in relation to contributions
Under the tax agent exemption, a registered tax agent may provide advice on any tax implications of contributions into an SMSF (or other superannuation fund), such as a client’s eligibility to make concessional and non-concessional contributions and the tax treatment of those contributions. For instance, a tax agent can use a client’s total superannuation balance to advise the client on their eligibility for:
- the unused concessional contributions cap carry-forward
- the non-concessional contributions cap and the two-year or three- year bring-forward period.
However, they cannot recommend that a client make a particular level of contributions (although they can advise on the maximum level of contributions a client can make). This is because the decision to make a particular level of contributions involves considerations other than tax.
What do you do if you don’t want to give superannuation advice?
In order to help accountants, Partners Wealth Group developed a SMSF Advisory service, designed to assist accountants in delivering SMSF advice to their clients in a professional, specialist and cost-effective manner. Our services include:
- SMSF risk & strategic reviews – review current documentation and financials to identify potential risks and new strategies for the Trustees.
- SMSF advice or general SMSF advice – equipped to deliver SMSF advice and reviews in a cost-effective manner.
- SMSF trust deed review & update service – with numerous changes to superannuation legislation and death benefits over the past 5 years, it is extremely important to ensure the trust deed is up to date.
- Presentation of end of year financials – our SMSF advisors are available to present end year financials with you to your SMSF clients to ensure the broader SMSF discussion can be had.
For more information on how we can assist you in delivery of SMSF advice, please contact Alex Swansson (03) 8508 7800 or email us today.