Read more: Xerocon full coverage

The shit I have to deal with around the accountants’ exemption is unbelievable. Here is the exact text of an email I received that is sadly a true representation of a lot more:

“As of 1 July 2016 the accountant’s exemption will be removed. This means accountants will no longer be able to provide advice on the establishment and closure of self-managed superannuation funds (SMSF) or provide any advice in relation to superannuation funds or investment strategies, without holding or operating under an Australian Financial Services License (AFSL).

For any accountants who provide financial services outside the current exemption they may attract a penalty of $34,000, a two-year term of imprisonment, or both.”

 

Sounds like the world is ending and I’ll go to jail.

Sadly this is common of the lies being told by many financial planners and the level of fear and misinformation being spread by people with vested interests is massive.

Who is speaking up in defense of accountants? Sadly, no-one. The professional bodies are trying to provide information, but unfortunately most has fallen on deaf ears.

Let’s jump in and clear up some of this crap.

Start with the assertion that accountants won’t be able to provide any advice on super funds. This is totally wrong. There are many, many things that an accountant, even without a limited AFSL, can still do.

Factual information used in an advisory or informational capacity is totally fine. Most accountants aren’t aware they can still advise (factually) on pensions, contributions, SMSFs, as well as limited insurance and investment concepts. Accountants will even be able to set up SMSFs under an execution only arrangement (although I think this may ultimately be hard to defend).  

Personally I felt that the threat of penalties and jail for anything outside the (small) exemption that is being removed was a nice touch. Sadly again this doesn’t accurately reflect the range of services accountants can still provide, even without an AFSL.

Now I can’t say these people are trying to mislead us, but if this reflects their knowledge of the accountants’ exemption or general advisory practices then I worry about them giving advice.

Now we have covered the misinformation, here is my view.

I don’t want to be a financial planner, which is my personal choice. But being able to advise clients about SMSFs is important to me. With the range of available cloud software around SMSFs, advisory and compliance will be as simple and profitable as ever and we shouldn’t be giving that away.

My two favorite cloud apps for SMSF at the moment are, NowInfinity for set-ups, pensions strategies and ASIC compliance; and Class Super for compliance which is 100% cloud, links with NowInfinity and is easy to use.

With all this AFSL ‘noise’, the only questions I set out to answer were: What are we losing on 1 July 2016? And how do we get it back?

 

Here’s what are we losing on 1 July 2016:

From 1 July 2016 Regulation 7.1.29A (also referred to as the accountants’ exemption) will be repealed. From this date you cannot recommend the establishment or winding up of a SMSF unless appropriately licensed.

 

So here is where I came to my first realisation. Accountants lose the ability to recommend to “establish” or “wind up” an SMSF. Ok, got it, but what about the rest of the SMSF services and client questions I help with? People are telling me that I’m losing everything relating to SMSFs.

 

Here are services that I thought we lost but are actually untouched:

• Can clients ask us about the characteristics of a retail fund versus an SMSF? You are free to discuss as normal, no change.
• Can we discuss and set up borrowing in an existing fund? Absolutely, go for it.
• Setting up pensions, TTR’s and discussing the tax implications of lump sum payments? Absolutely, go for it.
• Take clients through what assets they can and can’t invest in and what is the tax treatment of different investments? No change, as you were.

 

This appears to not be as bad as some people lead me to believe. Guess what, it’s not.

Taxation implications of contribution strategies, rollovers, taxation, disposal and acquisition restriction advice, asset valuations, off market transfers and even discussing the what and why of insurance products – all are still merrily in the safe hands of the independent accountant.

Accountants can still provide Factual Information to their clients. This has been a great ability where accountants can tell clients the facts without it being financial advice. Obviously being careful not to weigh the facts as to cause an outcome, but the independent facts are what we can give, even with SMSFs after 1 July 2016.

Let’s not think everything is rosy. Losing the ability to advise a client around setting up or winding down an SMSF could have a real impact on being able to help your clients. Here is my disclaimer: this limited licence is a once-only opportunity to have our CA qualification counted towards the requirements for a financial services licence. Should you feel that those services are in your future you should consider taking it up. For me those services aren’t.

 

So how do we get it back?

There is a lot of information about getting licensed, but I want to focus here on how to just get back the ability to help clients set up and wind down SMSFs, which is the bit we are losing.

There is always the ability to become the authorised representative of another AFSL licensed business. Each to their own here, but I feel that I wouldn’t be able to give the clients unbiased advice without the sense that my AFSL holder wasn’t trying to get me to play the “how many products can you sell this month” game. I might be being unfair, but from the enquiries I have made in this area, it’s the fear that I have.

So, that leaves me with getting my own licence. After doing a lot of reading and hearing about the work and cost of getting the whole limited AFSL, I started to worry that it might just be too hard.

Then I finally just asked the question: To get back what I lost, what is the minimum I need? It turns out that the cost and the additional study isn’t that bad.

 

Breaking out the application of the AFSL I have documented the steps and the costs around the minimum Limited AFSL for a chartered accountant.

1. Kaplan RG146 course. If you’re a qualified CA with a degree, you only need to complete the SMSF module which costs $585. The one subject reduces the study as it covers what we know, superannuation, while leaving out the investment product stuff. Also the cost reduces from $1,655 for the full course.
2. Select a Responsible Person. Cost: $0. Before 1 July 2016 our CAANZ Public Practice Certificate counts. As we have done the RG146 subjects we qualify.
3. Ensure PI requirements are met. Cost: $0.; I contacted my PI provider and was pleasantly surprised that as long as I do the RG146 subject then the PI cover is enough and the premium doesn’t increase.
4. Be a member of an approved dispute resolution scheme. Cost: $0. You just need to join, no training or other requirements. Also, accounting fees can’t be disputed which was a relief. Have it but you will most likely not need it.
5. Meet base level financial requirements. Cost: $0. Solvency and positive net assets requirement – net assets must exceed net liabilities.
6. Cash needs requirement: you will need to maintain cash flow projections.
7. Compliance certificate requirements: if you do not hold client monies in relation to the limited licence you will not need an annual audit.
8. Australian Federal Police check for each responsible manager. Cost: $42.
9. Australian Financial Security Authority (AFSA) insolvency search. Cost: $12.
10. ASIC Application fee. Cost: $1,522. Fill in the form including copies of your business financials.
11. Education qualification and practicing certificate. Cost: $0. The form is tricky though and not having all the paperwork ready when you submit can trip you up.

 

Overall, I estimate for $2,161 in year one and some form filling you can get your own (limited) limited AFSL. Having seen some of the authorised rep offerings out there, the prices are a lot higher and you have to do the whole RG146 course as well as answer to someone else about how you advise clients.

Look beyond year one, the ongoing requirements are estimated to be as follows:

1. An ASIC Annual fee of $563 and the dispute resolution service of $275.
2. Training: will be similar to your existing CPE requirements, with a percentage of the hours needing to be in Superannuation.
3. Paperwork: there will be a simple annual ASIC form to fill in in which you self report any breaches and also sign to say you are complying.

 

This is an important decision for accountants and this won’t suit everyone. I just wanted back what I will lose. I never wanted to be a financial planner. This is a great opportunity for accountants to have our skills and qualifications counted towards a financial adviser licence if that’s something you wanted anyway. It just isn’t for me.

Likewise with being an authorised representative under someone else’s licence, I am sure it’s fine for some, but I like control over what I do and say.

Is it all as hard or confusing as I first thought? No.

Are people who flog products and services scaremongering again? Unfortunately, yes.

Can accountants get their own limited licence and keep doing what they always enjoyed and were good at? Absolutely.

Good luck. Paul.

Paul Meissner is a CA and director of 5ways Group Chartered Accountants, a Gold Xero Partner.