Accountants providing SMSF advice — time to act on limited AFS licence

ASIC has reminded those accountants without an Australian financial services (AFS) licence or who do not intend to become an authorised representative of an AFS licensee, to start applying for a limited AFS licence now, if they want to keep giving SMSF advice after 30 June 2016. ASIC said to date, it has received only 160 applications for the limited AFS licence and granted only 70 licences — despite the application process being open for the past 2 years. Lisa Lynch, Thomson Reuters

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ASIC said accountants should start preparing their applications and start any required training now should they wish to continue to provide such services after 30 June 2016. Accountants should also contact their professional membership associations (for example, Chartered Accountants ANZ, CPA Australia, Institute of Public Accountants). ASIC noted that after 30 June 2016, any accountant found to be providing unlicensed advice risks regulatory action. Providing unlicensed financial services is a criminal offence.

ASIC Deputy Chairman Peter Kell said that where an application is in good order ASIC can assess the application within 4 weeks, but if further details are required because the information provided is insufficient this will take longer. ASIC warned that accountants who do not lodge applications which meet ASIC's requirements by 1 March 2016 run a significant risk their application will not be assessed before 30 June 2016. ASIC said there was no proposal to extend the 30 June 2016 cut-off date as accountants have been able to apply for this type of licence since 1 July 2013. "Our message to accountants is clear: don't be complacent, you need to act now," said Mr Kell.

Some key points from ASIC:

• the current "accountants' exemption" under regulation 7.1.29A of the Corporations Regulations 2001 permits "recognised accountants" to provide a recommendation in relation to an SMSF, without the need for an AFS licence. As part of the Future of Financial Advice will cease to apply on 1 July 2016. Since 1 July 2013, accountants have been able to apply for the new limited AFS licence or become an authorised representative.
• according to ASIC, the licence application process is not complicated. ASIC has prepared INFO Sheet 179 Applying for a limited AFS licence to assist applicants. ASIC said it has reduced the number of questions in the application Form for the Limited AFS licence and similarly reduced the number of supporting proof documents required to be lodged with the application. ASIC said it will also assist applicants if they need guidance with the process.
• completing accountancy-based continuing education will not be sufficient to be entitled to provide financial advice in relation to SMSFs. Satisfactory completion of relevant training courses to provide advice on the relevant classes of financial products will be necessary.
• the organisational competence requirements for recognised accountants will be more onerous after 30 June 2016. Recognised accountants applying after 30 June 2016 will need to demonstrate at least 3 years of relevant past experience.
• an accountant's standard professional indemnity insurance will generally not cover the provision of financial services by the accountant.
• if ASIC receives an application but has not granted a licence by 30 June 2016, the applicant cannot give SMSF-related financial advice and dealing services after 30 June 2016 until such time as they are granted a licence or they become an authorised representative of a licensee.

Source: ASIC media release 15-227MR, 25 August 2015

SMSF Association

The SMSF Association said that accountants who want to give financial planning and superannuation advice after 1 July 2016 need to start the process now. The required training typically takes from a minimum of 6 months up to 2 years, said Liz Ward, Head of Education Services at the SMSF Association, and Kath Bowler, CEO of Licensing for Accountants (an independent firm dedicated to guiding accountants through the licensing maze).

Ward and Bowler said that giving advice on setting up an SMSF from 1 July 2016 will be no different to advising on contributions, LRBAs and pensions (including transition to retirement pensions), and will require a full or limited AFS licence. Accountants who believe that they can remain exempt on the basis that they only give tax advice need to consider if they are truly just giving "tax advice". The SMSF Association warns advisers that if they are taking other factors into account (such as when they can make contributions, rollover benefits, the fund's investments or commencing an income stream), then they will need a licence.

Likewise, tax advisers will need to provide a disclaimer noting that they are only providing tax advice, and clients must seek advice from a licensed financial adviser. Accordingly, accountants who aren't licensed may be holding back their business opportunities, as well as potentially losing financial planning and superannuation revenue and clients to practitioners who are licensed, the SMSF Association said. (Source: SMSF Association media release, 26 August 2016.)

More Cleardocs information on related topics

You can read earlier ClearLaw articles on a wide range of SMSF topics.

Order Cleardocs document packages

• Limited AFS Licence Application
• Set up an SMSF
• SMSF set up + register corporate trustee
• Update an SMSF deed
• Set up an SMSF pension
• Create an SMSF Investment Strategy
• Arrange SMSF borrowing documents
  • for when the lender is a bank
  • for when the lender is a related party
• SMSF Death Benefit Nomination — binding or non binding
• SMSF Death Benefit Agreement — binding and permanent
• SMSF Minutes & Resolutions Package