In brief
As time runs out to obtain a limited Australian Financial Services Licence (AFSL), as an accountant, you need to act quickly to determine your next course of action.
What you need to know
- From 1 July 2016, the accountant’s SMSF exemption will end.
- Transition arrangements, that facilitate a streamlined AFSL application process, expire on 30 June 2016.
- If you intend to continue to advise in this area, and want to benefit from the transitional arrangements, you will need to commence the AFSL application process by early March.
- It is envisaged that ASIC will enforce strict penalties for accountants who do not comply within the new landscape.
Accountant’s SMSF Exemption ending 1 July 2016 – What are you going to do?
From 1 July 2016, accountants will not be able to give advice on setting up or closing down a self-managed super fund (SMSF) unless they’re covered by an Australian Financial Services Licence (AFSL).
Some exemptions will continue to apply, allowing accountants to advise on compliance and tax issues relating to financial products. However, a Chartered Accountants article nicely highlights the implications for any accountants:
“Arguably, any practitioner offering business or personal financial structuring advice will need to at least consider an SMSF for their clients and therefore will need to be licensed or authorised in order to make a recommendation to set one up if required.”[1]
The Australian Securities and Investments Commission (ASIC) continues to issue updates about the very small number of applications lodged by accountants for the limited AFSL – despite the estimated 30,000 practising accountants in Australia. One can expect that ASIC will seek to commence surveillance and enforcement action for non-compliance.
Transitional arrangement – Why act now?
The transition arrangements that provide a streamlined application process for accountants will expire on 30 June 2016, after which time the application process is likely to take significantly longer and will require additional supporting documentation to demonstrate the required experience criteria.
Over the next month or so, accountants who haven’t yet decided whether they want to continue advising on SMSFs should carefully consider their future approach to advising on SMSFs, financial products and any strategic partnerships currently in place with AFSL licence holders – including financial planners.
For those who intend to apply for a limited AFSL under the transitional arrangement, given the time required to successfully complete an application, ASIC warns that if you don’t start this process by early March 2016, chances are that you will not be authorised by 1 July 2016.
ASIC Deputy Chairman Peter Kell has stated that:
“Accountants should ensure they’ve allowed enough time to properly prepare an application and to undertake any relevant training. Where an application is in good order, ASIC can assess the application within four weeks, but if further details are required because the information provided is insufficient, this will take longer.”[2]
ASIC has also confirmed that there are no plans to extend the 30 June 2016 cut-off date as there has been adequate prior notice and time to apply for a licence.
What are your options?
Accountants currently advising on SMSFs typically have the following choices:
- stop providing SMSF advice (which may involve forming a relationship with an AFSL holder (such as a financial planner) to continue service to clients);
- obtain a limited AFSL (which also permits advising on a limited range of financial products as well as SMSFs); or
- become an authorised representative of another AFSL licence holder.
Each alternative will have its own implications for the relationships that accountants currently have or will have with their existing and prospective SMSF clients.
Our experience in this area suggests that many accountants that are looking to continue to advise their clients about SMSFs are considering getting their own limited licence or becoming an authorised representative. But there are also many accountants who are concerned that the regulatory and compliance obligations and cost will be too onerous for them, and they are therefore seeking to find suitable referral relationships with financial planners.
Conclusion
We’ve found that the benefits offered by the limited AFSL can be advantageous to accountants looking to expand their practice and advise on SMSFs as well as a broader range of financial products such as life insurance, shares and simple managed investment schemes. That being said, this may not be the best approach for you.
At this time, the impending change presents both a challenge and an opportunity for the accounting community. It will be interesting to watch this space over the next year or so to see what the future of SMSF advice delivery will look like.
