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Industry association hits out at ‘legislative anomaly’ with SMSFs

Miranda Brownlee
24 August 2017 — 1 minute read

An industry association has criticised the definition of conflicted advice under current legislation on the basis that internal administration services offered by SMSF firms are not considered to be conflicted.

A white paper compiled by the Association of Independently Owned Financial Professionals (AIOFP) in conjunction with former ASIC executive Brett Walker states that SMSF services receive “preferential legislative treatment under FOFA and the Corporations Law” which can lead to “compromising s923A objectives under certain circumstances”.

The white paper, titled Amending s923A for the post FOFA advice era is aimed at exploring how s923A of the Corporations Act can be improved for industry participants and consumers. This section of legislation outlines in what circumstances advisers can use restricted words and expressions related to independent financial advice.


The white paper stressed while it wasn’t critical of the SMSF structure or sector, it believes the parameters of s923A should be modified due to an anomaly in the system relating to internal SMSF administration services that are offered.

“[One] critical FOFA flaw is the inconsistent approach to classifying institutionally operated administration platforms as ‘financial products’ where advisers receiving a rebate back from the administration fee is considered conflicted,” the white paper stated.

“Then on the other hand under the same legislative framework, you can have an adviser offering their own internal administration service to manage a client’s portfolio under SMSF conditions that is inexplicably considered not to be conflicted.”

While SMSFs received specialised legislative treatment under FOFA/Corporations Law to make it lawful to operate in the manner, the AIOFP questioned whether this “satisfies the spirit of s923A” or whether it was fair to other advice operators.

“Any profits made on administering a client’s SMSF service can be used to cross subsidise practice infrastructure, something non SMSF advisers' independently owned advisers are not permitted to do post FOFA,” the whitepaper noted.

“It hardly seems fair that SMSF advisers have the opportunity to ‘package’ the internal client SMSF administration fee under ‘tax’ or similar advice and other non SMSF advisers are not afforded the same conditions to cross subsidise practice infrastructure costs.”

The AIOFP stated it was not advocating a return to platform rebates, however, only pointing out the “inconsistencies in FOFA’s application and why SMSF structures can compromise the parameters of s923A”.

Another unique circumstance that can arise from advisers providing advice on SMSFs, the paper said, is the ability to recommend direct property to clients.

“Direct property is largely out of ASIC’s jurisdiction, not an ideal outcome for deciding whether an adviser is acting within the confines of s923A,” it said.

“We recommend that the asset allocation within an SMSF should be products that fall within the ASIC regulatory framework if advisers want to be s923A compliant.”


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Miranda Brownlee

Miranda Brownlee


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 has also directed SMSF Adviser's print publication for several years. 

Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.

You can email Miranda on: This email address is being protected from spambots. You need JavaScript enabled to view it.

Industry association hits out at ‘legislative anomaly’ with SMSFs
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