Earlier this year, the regulator amended the ASIC Corporations (Recognised Accountants: Exempt Services) Instrument 2016/1151 to allow full AFSLs to provide exempt tax advice in relation to products not covered by their licence.
Regulation 7.1.29(4) enables a person to provide advice on taxation issues, including advice in relation to the tax implications of financial products, without an AFSL, ASIC said.
However, speaking at the National SMSF Conference 2017, The Fold Legal solicitor director Jaime Lumsden Kelly said the amendment has created new discrepancies in the discriminatory treatment of the same advice provided by a licensed and unlicensed accountant.
“What we have now is a situation where an unlicensed accountant can give advice on say, securities and pension phase and use the tax advice exemption but a licensee who has an authorisation in relation to securities, cannot,” Ms Lumsden Kelly said.
“I don’t think that’s appropriate because essentially the regulatory burden has been imposed based on your licensed or unlicensed status and not based on the consumer protection risks of giving that advice.
“Substantively the advice is the same, why does one person receive more protection than the other? Why does one client now have to have an SOA and the other client doesn’t?”
The discrepancy in treatment will “motivate people to not want to get a license because they lose the benefit of the tax advice exemption”, according to Ms Lumsden Kelly.
Further, the issue is compounded in the corporate or partnership entity act if a tax accountant is employed by a licensee.
“Strictly speaking, a tax accountant employed by a licensee… can actually give that advice under the tax advice exemption because he doesn’t have the authorisation,” said Ms Lumsden Kelly.
“The problem is when he gives that advice, his employer also gives that advice and his employer has a licence and their licence covers superannuation so he’s exempt but the licensee is not so you end up with the absurd situation where the individual doesn’t need to give an SOA but the licensee does.
“This is another reason why I say this exemption is actually now quite broken and functionally doesn’t work.”
Ms Lumsden Kelly believes there might be changes on the horizon considering how ASIC has made two amendments in a short period of time, but is not overly optimistic.
“ASIC is fixing things as they arise but still without any greater holistic perspective about how the regime fits within the industry and the profession,” she said.
“I don’t feel that the people within the regulator had a good enough understanding of how accountants operate.
“Unfortunately, it’s been a lot of ignorance about how the profession works and there is insufficient understanding.”
This situation was arrived at via lobby groups that wanted to firm up their position in the SMSF market
It is a costly exercise for everybody and is not actually achieving much for the client except higher fees
and additional complexity
You also have a large section of the accounting population with a large amount of knowledge unable to use it unless they delver it via a financial planning framework. This delivery method has never been their method of operation and a lot of accountants don’t fit its sales based culture
That is not going to change so this contrived law that was put there to satisfy the lobby group is not really working and I suppose suffering from a bit of civil disobedience
Another question – why aren’t lawyers subject to thus regime – what is special about them and their advice –
So the experts in ASIC have stuffed it up and continue everyone.
Pity they couldn’t just leave things be the way they were when things were working smoothly but instead we have this continual upheaval with the bureaucrats all jumping over theme selves trying to reinvent the wheel.
[i]“I don’t feel that the people within the regulator had a good enough understanding of how accountants operate. Unfortunately, it’s been a lot of ignorance about how the profession works and there is insufficient understanding.”
[/i]
Surely it should have been the job of the accounting bodies to explain this at the early stages of formulating the new regulations?
This was a very good presentation. It highlights the absurdity of the exemptions.
It is important to understand what a recognised accountant is an individual with a practicing certificate from a recognised accounting body – CPA, NIA, CAANZ etc.
The exemption does not apply to SMSF administration firms. It may apply to their staff that are recognised accountants but this is of no use where an administrator holds an AFSL or is a CAR of a licence holder.
It has been reported that ASIC is investigating unlicensed accountants, they should also focus on licenced/unlicensed SMSF administrators.
“I don’t feel that the people within the regulator had a good enough understanding of how accountants operate”
You can say that again. ASIC and the accounting bodies appear to have given up and put it in the too hard basket – leaving a whole industry bewildered and confused, when many of them have invested in tens of thousands of dollars trying to adhere to a set of broken rules that don’t make sense.
A major part of the problem is the inclusion of SMSFs as financial product advice. The entity is a structure, not a product, and super strategies shouldn’t need the whole SoA document.
The way this should work is that the investment piece should be the only bit that needs a SoA and, this is done separately to the strategic advice.
If ever the silliness of calling strategic SMSF advice, financial product advice, was in doubt, Super17 should have brought it into sharp focus.
You had Advisers giving traditional Accountant advice and Accountants not able to unless AFSL licensed.
The only losers are the consumers who are supposed to be the focus of the regime.