From the beginning of the new financial year, accountants will have to be licensed to deliver SMSF advice to clients.
The countdown is now on until 30 June 2016, when the accountants’ exemption will be repealed. With only two months left of the three-year transition period, a high level of confusion remains about what this really means and what options accountants have in light of this reform.
What advice can you provide if you are unlicensed?
Regulation 7.1.29A, commonly referred to as the accountants’ exemption, permits a recognised accountant to recommend a client establish or wind up an interest in a self-managed superannuation fund (SMSF) without being licensed under the Australian Financial Services (AFS) licensing regime. This regulation will be repealed on 1 July 2016. If you want to provide advice from this date, you must be appropriately licensed in some capacity.
Importantly, Regulation 7.1.29 will continue to permit the provision of administration, compliance, audit or tax advice in respect of SMSFs and other financial products without requiring you to be licensed. It is important to understand the details and requirements of this regulation.
For example, when providing tax advice in relation to a financial product, the advice must relate to the taxation consequences of financial products. It should not be used to recommend particular financial products or strategies, and certain written disclosures must also be provided.
Financial Advice and Regulations: Guidance for the Accounting Profession provides detailed guidance on what services you can and cannot provide if you are not licensed as a financial planner. If you do not wish to be licensed, you still need a solution for your practice such as a referral arrangement to an appropriately licensed financial planner.
But remember, you must disclose to the client any benefits you may receive from the referral.
You’ve decided you need to be licensed from 1 July 2016. What are your options?
If you hold a public practice certificate with CPA Australia (or CAANZ or IPA) you can apply for your own limited AFS licence. Under the streamlining provision, a member who holds a public practice certificate is deemed to meet the experience requirement under Australian Securities and Investments Commission (ASIC) Regulatory Guide 105 Licensing: Organisation Competence (RG 105).
Importantly, you must submit your application before 30 June to apply under these provisions. You must also meet the education requirements of RG 105, as ASIC will assess this as part of your application.
Although it’s not assessed as part of the application, you must ensure you also have the required knowledge and skills to provide the advice and services under your limited AFS licence, as set out in ASIC Regulatory Guide 146 Licensing: Training of Financial Product Providers. As the manager, this is your responsibility and you must ensure anyone authorised under the licence also meets this requirement.
If you do not hold a public practice certificate or cannot complete your training before 30 June, you can be licensed as an authorised representative. This is also an alternative for members who do not wish to hold their own licence. Under this option, you do not need to meet the experience requirement of RG 105. However, you must meet the training standards of RG 146, which will be set by your potential AFS licensee.
If you need a solution for your practice, but do not want to provide the advice yourself, you could consider recruiting an in-house financial planner or setting up a joint venture with a financial planning practice. It is important from the outset to agree and set clear objectives, as well as to invest the time to make your chosen solution successful for both parties.
With only two months to go, it is important you have a solution in place for your practice. Remember, CPA Australia has a range of resources available to support members, regardless of the solution you choose, at cpaaustralia.com.au/smsfadvice.
Important updates on your 2016 SMSF licensing options