Tax advice: only one piece of the SMSF puzzle

Tunnel vision: Accountants resisting change

One fundamental issue in the accounting world is that accountants within the SMSF space often prioritise tax objectives over broader financial goals. That is, tax is often front of mind when in reality it is just one part of an SMSF trustee’s wider strategy.

For example, certain investments may offer you fully franked dividends and a tax refund – in other words, what could be a potentially ideal tax outcome.

But what if the market drops off by 20 per cent and your client does not have enough money to make their necessary pension payments? A broader strategy must always be the priority, and always be of absolute importance, to avoid unfavourable consequences for the self-managed fund and its trustee or trustees.

Following on from that, it is clear that many practitioners – including both accountants and financial advisers – don’t have a thorough understanding of their clients’ broader financial goals. In turn, funds are often not invested appropriately, and are not structured to achieve the required cash flow outcomes for their clients.

There’s also a secondary problem related to this – many trustees are not entirely aware of the finer details and the risks associated with their own investment strategy. This can have dire consequences, because trustees ultimately hold the responsibility for their SMSF. Engaging a professional certainly does not exonerate an individual from their obligations as a trustee of their self-managed fund.

In fact, these trustees may even be at risk of attracting the attention of the ATO. Trustees are required to comprehensively understand their investment strategy and ensure that it is well suited to their savings and retirement objectives. If the ATO comes knocking, it’s essentially the trustee, or trustees, that will have to answer to the regulator.

Assisting trustees to tailor, compile and document an SMSF investment strategy is one of the most valued aspects of an accountant and adviser’s role. An important point to note is that this is not a 15-minute job. In fact, it can often take several consultations, but it is one of the most important elements of a self-managed fund to get right.

Something accountants need to realise is that there is an opportunity to help their clients formulate and achieve their financial goals on a larger scale. However, this may require a change of business strategy, and a look outside the traditional parameters of an accountant’s role.

Embrace the changing landscape

The new licensing regime is not news to accountants or the financial services industry. If you want to get on board and offer a full range of SMSF services to your clients, you need to be appropriately licensed under the new regime.

Many clients are oblivious to this regime, partly because it is not being actively promoted within the accountancy world, and partly because it’s simply not on their radar. In fact, some clients are barely aware of the highly-publicised MySuper changes.

However, just because they're not aware of the changes on the horizon does not mean they’re not demanding the resulting holistic and comprehensive services from their accountants.

The bar is rising significantly for accountants because clients are expecting more. However, in many cases, they’re not getting it or receiving the advice they deserve.

Businesses that are only offering basic compliance and taxation advice are not being as competitive as they could be in the marketplace, and certainly are not offering as much as they could be to their clientele.

People seeking SMSF advice are getting younger and more savvy – if they can find basic services cheaper elsewhere, they will. In order to retain these clients, tax should be only one part of your overall value proposition; a point of difference is necessary to keep them on board.

This does not mean scrapping the basic compliance and tax services altogether; it’s just a way of forging new relationships with your clients that would otherwise not occur if you did not take the initiative. Tax advice, really, is just one piece of the SMSF puzzle.

Jonathan Reynolds is a director at Skeggs Goldstien