Being the trustee of a self-managed super fund can be a challenging task at times, and most people need a bit of help at certain stages when running a SMSF, particularly when a decision, or strategy, requires financial advice. Traditionally, many Australians have turned to their accountant for assistance, but relatively new rules mean accountants can no longer help with establishing and winding up an SMSF unless they are licensed, although accountants can still provide advice on certain SMSF-related matters.
Until 30 June 2016, accountants were permitted to provide advice on setting up and winding up a SMSF (and other product-related advice) under the so-called ‘accountants’ exemption’, which has now been repealed. The removal of the accountants’ exemption has left many people – even financial advisers and accountants – confused about who can provide SMSF advice and services, and what SMSF-related advice requires a financial services licence.
SMSF trustees need to ensure they are getting assistance from someone licensed and qualified to do so. To help SMSF trustees navigate their way through the new rules, we have compiled a checklist of common SMSF services and types of financial advice available, to clarify whether, and when, an accountant without an Australian Financial Services Licence (AFSL) can provide them.
How did the accountants’ exemption work?
Before explaining who can do what, it’s worth understanding a little of the background. Until 30 June 2016, accountants could provide a range of services to SMSFs under the accountants’ exemption contained in Regulation 7.1.29A of the Corporations Regulations 2001. This exemption allowed accountants to provide advice on the establishment and winding up of SMSFs without needing to hold an AFSL. As part of the financial advice reforms (FoFA), the government removed the accountants’ exemption. Since 1 July 2016 accountants are subject to stricter rules relating to the provision of financial advice, including no longer being able to recommend the set-up of a SMSF, without an AFS licence.
What are the new advice rules for accountants?
Put simply, since 1 July 2016 accountants can still provide a wide range of advice and services to the trustees of an SMSF, however, if the financial advice and services involve personal advice, the accountant must hold an AFS licence. This is the same type of licence financial advisers require to provide personal advice about financial products and services, and advice about the suitability of such products and services for your personal circumstances.
The AFSL regime differentiates between advice and administration. The laws still allow unlicensed accountants to assist SMSF trustees with basic SMSF administrative tasks (such as the paperwork for fund establishment and rollovers), and to provide factual information about investments and strategies. The accountant must be licensed however, to provide advice and information about the suitability of an investment product or strategy for the SMSF.
When your SMSF must use a licensed accountant
Only accountants who are licensed under an AFS licence can provide personal advice such as:
1. SMSF establishment
- Establish or wind up an SMSF
- Advise on the appropriateness of an SMSF for your personal circumstances
- Explain the suitability of different super investment options and funds
- Recommend one super structure over another
- Suggest consolidating or rolling over assets into a single fund
2. Contributions
- Recommend additional super contributions
- Suggest establishing a salary sacrifice arrangement
3. Pensions and withdrawals
- Recommend starting a super pension or TRIP pension
- Calculate the super pension amounts needed to meet your income requirements based on your account balance, life expectancy and estate plans
- Organise an ad hoc lump sum withdrawal
- Recommend rollovers out of an SMSF
- Recommend the use of reserving strategies
4. Investment assets
- Recommend purchasing property through your SMSF
- Prepare a tailored investment strategy for the SMSF
- Recommend appropriate specific assets to buy when establishing an SMSF, including basic deposit products and cash management accounts
- Recommend establishing an LRBA (Limited Recourse Borrowing Arrangement)
5. Estate management
- Organise a binding death benefit nomination
- Recommend appropriate beneficiaries for a binding death benefit nomination