ASIC’s SMSF guidance spurs tax advice confusion
An inconsistency between an information sheet distributed by ASIC and the Corporations Act is casting doubt over whether accountants who are authorised representatives can provide taxation advice on specific products, according to industry experts.
Licensing for Accountants chief executive Kath Bowler says information sheet 216, which was distributed by ASIC last December, has caused confusion for accountants trying to determine which exemptions apply to them.
“It has actually separated the accountants into four or five different buckets and now they need to work out which exemptions apply based on whether they’re licensed, whether their entity is licensed, whether a related body corporate is licensed, so it’s quite challenging for them,” Ms Bowler said.
She said the wording of the information sheet suggests that accountants “who have a limited authorisation from a full AFSL provider cannot give tax advice on specific products," which is not necessarily correct.
The main licensing providers tend to be full AFSL providers, so this could impact the bulk of accountants who are authorised representatives, Ms Bowler said.
This affects the ability of accountants to provide tax advice on things such as the CGT relief.
“I know the accounting bodies are working to rectify this with ASIC. [This] is an unintended consequence of the drafting that left out authorised representatives, but it’s quite an issue for CGT,” Ms Bowler said.
The Fold Legal director Jaime Lumsden Kelly believes the information sheet from ASIC is inconsistent with what the Corporations Act says.
“There are a number of different exemptions in the Corporations Act and the regulations, and some of them say things like ‘you do not require an AFSL if you do not meet the following requirements,’” Ms Lumsden Kelly explained.
She explained how the exemption for accountants for providing tax advice on specific products operates.
“The way that this exemption works, is that it says that where you provide financial product advice as defined in the act, it won’t be treated as a financial service in certain circumstances,” Ms Lumsden Kelly said.
“If it’s not a financial service, it doesn’t matter whether the person providing it is licensed or not. They don’t need to be appropriately authorised because it’s not a financial service.
“The ASIC guidance, on the other hand, essentially says that ‘you don’t need to have a licence, but if you’ve got one, then too bad you can’t rely on this exemption’”.
“But this exemption is not like that. It’s just saying it’s not a financial service and if it’s not a financial service, it’s not regulated by the Corporations Act at all, except to the extent that you’ve got to comply with conditions such as giving a statement warning.”
While Ms Lumsden Kelly believes that any accountant can still rely on this exemption, the risk lies in the fact that ASIC has publicly said something different, which creates confusion.
“This presumably means ASIC is enforcing the law on a different basis than what the regulations actually say. So what happens in that situation is that you wind up with a regulator that is attempting to enforce the law in a way that it doesn’t apply, which means that people who are legitimately doing the right thing can sometimes fall foul of the regulator,” she said.
“So [people] may be subject to regulatory scrutiny and may end up in proceedings with ASIC if ASIC decides to take them to court. If it went all the way to court, my view is that it would be interpreted that it’s not a financial service, it’s quite explicit what it says in the regulation. Therefore, anybody can avail themselves of that exemption but there could be a lot of heartache and expense in getting to that point.”
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.