Accountants & SMSF Advice - the current position

Since 1 July 2016, only individuals who are authorised under the Corporations Act can provide financial advice in relation to self managed superannuation funds.  An individual will be authorised if they are directly or indirectly licensed under the Corporations Act.  An individual is directly licensed if they hold a financial services dealers licence.  An individual is indirectly licensed if they hold an authorised representative authority from a licensed dealer. 

Previously accountants were able to provide certain financial advice in relation to SMSFs without being licensed –whether directly or indirectly.  This was due to an express statutory exemption.  However, this exemption was removed on 30 June 2016.  Consequently, since 1 July 2016 accountants who are not licensed (whether directly or indirectly) cannot provide financial advice in relation to superannuation

If an accountant is not licensed to provide financial advice under the Corporations Act – what are they permitted by law to do in relation to the SMSFs?  The short answer is that they can continue to provide accounting services and tax agent services (assuming they are registered as tax agents) and they can provide factual information about SMSFs and the taxation consequences of proposed actions.  

Possibly, an effective litmus test as to what an accountant, who has chosen not be licensed under the Corporations Act but who is a registered tax agent, can do in relation to an SMSF is the “advice” vs “information” distinction.  If you ask the accountant whether you should do something – that is advice.  If you ask the accountant what are the taxation or superannuation consequences of you doing something – that is information.   The former cannot be provided by the accountant but the latter can be provided.

As an example, Bill asks his accountant:

“Should I increase my contributions to super for the current financial year?  I am currently contributing at the annual rate of $20,000 per year?”

This is a request for advice and the accountant must not give the advice sought.  The accountant would have to say something like”

“You have requested my opinion as to whether you should increase your super contributions for the current financial year.  Unfortunately, I am precluded from answering your question as I am not licensed under the financial services provisions of the Corporations Act.”

If Bill were to ask his accountant:

“I have contributed $20,000 so far this financial year into super, if I contributed another $10,000 into super would I be entitled to claim a tax deduction for the entire amount?”

This is a request for taxation information and the accountant can respond to the question.

However, if Bill asked the accountant the following question:

“I am currently contributing to super at the annual rate of $5,000 per year.  If I contributed another $20,000 in the current financial year what are the taxation consequences?”

This is also a request for taxation information and the accountant, as a registered tax agent, is permitted to respond to the question.

The accountant could say:

“If you contributed another $20,000 given your particular situation, you could claim all or part of the $20,000 as a tax deduction.  To the extent you claimed the $20,000 as a taxation deduction, it will reduce your assessable income by the amount which has been claimed – thereby reducing your tax.  

To the extent you claimed a tax deduction then the amount claimed would be subject to tax at 15% in the hands of the trustee of the superannuation fund as it would be treated as assessable income of the fund.”

Apart from providing taxation and superannuation information the accountant (who is not licensed under the Corporations Act but is a registered tax agent) could also provide the following services in relation to SMSFs:

• the preparation of SMSF accounts and tax returns

• the calculation of the tax and preservation components of members’ super balances

• drafting trustee minutes and maintenance of trustee records

• monitoring of income stream compliance

• tracking contributions against contribution caps

• dealing with excess contributions issues

• advising on small business concessions.

However, an accountant who is not licensed under the Corporations Act could not do or implement the following:

• recommend establishing or winding up a self managed superannuation fund

• recommend making superannuation contributions

• recommend rolling over benefits to another superannuation fund

• recommend commencing a pension (including a transition to retirement pension)

• recommend a specific pension drawdown rate

• recommend cashing out or rolling over a pension

• recommend accessing super benefits

• recommend entering into a salary sacrifice arrangement

• recommend entering into a re-contribution strategy

• recommend entering into a unallocated contribution strategy.