Accountants wishing to provide self-managed superannuation fund advice after 30 June 2016 will need to ensure they apply for an Australian Financial Services licence now, to avoid being caught on 1 July 2016. From that date, the ‘accountants’ exemption’, which accountants have long relied on to provide clients with the self-managed superannuation fund advice they need, ceases to have effect.

Overview

An accountant wanting to provide Self-Managed Superannuation Fund (SMSF) advice services after 30 June 2016:

  • must do so under a full or limited Australian Financial Services (AFS) licence
  • can take advantage of the transitional arrangements for ‘recognised accountants’ by applying for a limited AFS licence if their application is submitted before 1 July 2016; note, however, that if an application is not processed by 1 July 2016, then the accountant will not be permitted to provide their SMSF services until the AFS licence is issued. ASIC advises that applicants must submit their application by 1 March 2016 if they want their application to be processed in time for the 1 July deadline.

Alternatively, an accountant may become an authorised representative of another AFS licensee. In this case, the accountant would give advice under the supervision of that licensee. 

Repeal of the ‘accountants’ exemption’

Up until now the ‘accountants’ exemption’ of the Corporations Regulations 2001 (Cth) (Regulations)has permitted recognised accountants to advise on a client’s SMSF without the accountant having to hold an AFS licence.

As part of the Future of Financial Advice (or FOFA) reforms, the ‘accountants’ exemption’ has been repealed and will cease to operate on 1 July 2016. From this date, accountants will only be able to continue to provide SMSF advice and related services if they are licensed to do so under an AFS licence.

The limited AFS licence and transitional arrangements

A full AFS licence enables the holder to give financial advice across various areas, including SMSFs. The new and less burdensome limited AFS licence effectively provides an authorisation to give superannuation advice (including SMSF advice) and other financial services which can be broader than those currently allowed under the accountants’ exemption. The limited AFS licence was introduced on 1 July 2013.2

The limited licence is available to anyone, not just accountants. However, ‘recognised accountants’ who apply before 30 June 2016 benefit from entering the AFS licensing regime under the transitional arrangements. Those arrangements:

  • apply to accounting firms whose nominated responsible managers hold a public practice certificate or certificate of public practice issued by CPA Australia, Chartered Accountants Australia and New Zealand (formerly the Institute of Chartered Accountants Australia) or the Institute of Public Accountants
  • require the responsible managers to satisfy only the education and training requirements of a limited AFS licence
  • do not require those responsible managers to demonstrate relevant experience providing the financial services to be provided under that licence.

Those issued with a limited AFS licence under transitional arrangements will need to comply with a condition that they can demonstrate to ASIC within three years (if required by ASIC) that they have knowledge of their obligations under the Act and Regulations, and are competent to provide the services covered by the limited AFS licence.

However, accountants will need to act now in order to benefit from the transitional arrangements. If they do not submit their application for a limited AFS licence by 30 June 2016 then, like other applicants, the accountant will need to demonstrate in detail their specific relevant experience and expertise in providing the financial product advice and other financial services they propose to provide under the licence.

The other standard requirements for the grant of an AFS licence will also need to be met regardless of whether the applicant qualifies for the transitional arrangements. These include requirements that the applicant is of good fame and character, has the financial resources to provide the services proposed and has adequate risk management systems.

SMSF advice under a limited AFS licence

The holder of a limited AFS licence can be authorised to provide:

  • advice on, and dealing in, an interest in an SMSF
  • advice on superannuation products in relation to a client’s existing superannuation holding where required for:
    • recommending the establishment of an SMSF
    • advising on contributions or pensions under a superannuation product
  • ‘class of product’ advice about superannuation products, securities, general insurance, life insurance, basic deposit products and simple managed investment schemes.

Accountants can specify which financial services and products they want covered by their limited AFS licence in their application. The final authorisations provided could include one or a combination of the above services.

Importantly, responsible managers must be able to demonstrate they have appropriate training in the licence authorisations their accounting firm applies for. Some accountants will therefore need to complete some training before the application is lodged with ASIC.

Applications to ASIC

Applications for a limited AFS licence can be made to ASIC via its online application system. Accountants wishing to take advantage of the transitional arrangements will need to act now to ensure they have enough time to prepare the application.

ASIC has advised that applications that are in good order and contain all the necessary information and documents should be assessed within four weeks. However, those that require the applicant to supply further details or information to ASIC will take longer.

Despite these stated timeframes, applicants should expect there could be delays in ASIC’s processing due to a large number of accountants applying at the same time. It is therefore best to apply as early as possible. ASIC advises that applicants should submit their application by 1 March 2016 if they want their application to be processed in time for the 1 July deadline.