The introduction of the Financial Services Reform Act in 2001 heralded a new era of financial advice reforms that, whether by design or otherwise, included a member’s superannuation interest as a “financial product”. For large superannuation funds that makes sense as a member is turning over their hard earned SGC to a completely independent and faceless super trustee (and behind the scenes fund manager) to look after their life savings.
But what were they thinking with SMSFs? Did they try a one size fits all approach so that a SMSF member was also caught, although by law they are required to sign off on all investments of the fund. I don’t know but it never really made sense to me. Luckily there was an exemption for accountants to establish and wind up SMSFs but that “across the board” exemption was replaced with much fanfare by the limited license for accountants.
BUT – did you know there still is a whole raft of exemptions for accountants and tax agents in terms of SMSF advice. Unfortunately these exemptions are not available for limited license accountants nor AFS licensees.
ASIC Info Sheet 216: Exemptions that apply for SMSF services
Here are some important grabs from the ASIC sheet:
1. ASIC on the licensing regime and the current exemptions for accountants
“While the licensing exemption in regulation 7.1.29A for recognised accountants who gave financial product advice about acquiring or disposing of an interest in an SMSF has been repealed, a range of other exemptions still continue after 1 July 2016. Under these exemptions, you can provide some types of financial services without being covered by an AFS licence: see Table 1: SMSF services and the AFS licensing regime for a summary of these exemptions.”
2. ASIC on SMSF Tax Advice
“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.”
3. ASIC on establishing a SMSF
“You may provide advice on establishing, operating, structuring or valuing an SMSF without an AFS licence: regulation 7.1.29(5) ….. Where you are relying on this exemption, if your client is a ‘retail’ client (as opposed to a ‘wholesale’ client – see section 761G and related regulations for the definition of this term), under regulation 7.1.29(5)(d) you must provide a written statement to your client that:
1. you are not licensed to provide financial product advice under the Corporations Act
2. they should consider taking advice from an AFS licensee before making a decision about a product.
The advice you give about establishing, operating, structuring or valuing an SMSF must not amount to an explicit or implied recommendation to establish an SMSF, or to acquire or dispose of an interest in an SMSF (or another superannuation product).
However, we recognise that advice given to a person about the establishment of an SMSF may also carry an implicit recommendation that the person acquire an interest in the SMSF. Therefore, you are more likely to be able to rely on the exemption when your client has already made a decision to establish the SMSF before seeking your assistance to take the next steps. For example, you may recommend the best structure for an SMSF to suit your client’s situation, after they have made the decision to establish an SMSF.”
4. ASIC on Investment Strategies and Asset Allocations
“You may provide a recommendation or statement of opinion to your clients on broad asset allocation within their SMSF (regulation 7.1.33A) – that is, what proportion of funds should be allocated across one or more of the following categories:
1. shares
2. debentures
3. debentures, stocks or bonds issued, or proposed to be issued, by a government
4. deposit products
5. managed investment products
6. investment life insurance products
7. superannuation products
8. other types of assets.
Providing a recommendation or statement of opinion to clients on asset allocation within their SMSF is different from providing a class of product advice, which requires a licence: see our Limited financial services webpage. The exemption for providing a recommendation or statement of opinion on asset allocation does not apply to making a recommendation on or giving a statement of opinion about specific financial products or classes of financial product: see regulation 7.1.33A.”
5. ASIC on Contributions for Tax Agents
“Under the 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:
1. the unused concessional contributions cap carry-forward
2. 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.
As another example, a tax agent can advise a client that they will be eligible for a tax offset if they make a spousal contribution. The tax agent cannot recommend the amount of the spousal contribution. However, they may provide factual information about the spousal contribution eligibility criteria that is relevant to calculating the amount of the tax offset. This may include, but is not limited to, the spouse’s income and the amount of the non-concessional contribution to superannuation.”
6. ASIC on Tax Agents and Pensions
“A registered tax agent may also advise a client on the tax implications of moving their superannuation benefits from accumulation to pension phase but may not make a recommendation to a client about when to do so. For instance, a tax agent may advise the client of the tax implications of retiring at different ages (such as a client being able to withdraw superannuation benefits tax-free after a certain age) but should make it clear to the client that tax is not the only consideration involved in making retirement decisions.”
Note: I am doing a short thirty minute webinar on how accountants can give SMSF establishment, contributions, pensions and investment strategy advice on Wednesday 22 September at 11am AEST. If you want to see it live, register via the button under the webinar banner below. There is no cost for the webinar as we believe that training and education should be at cost – it is important to pay back.