Accountants still on the fence despite looming deadline
Despite all the talk, expectations that accountants would get their SMSF licensing sorted early have not been realised.
Over the last six months it was expected, or hoped, that accountants would start applying to either obtain a limited licence through ASIC or become authorised representatives of AFSL holders. Early estimates do not seem to have been realised.
Despite all the fervent messaging that compliance work is dwindling through the combined forces of technology and globalisation/offshoring, it seems that accountants are still, in general, undecided about what to do and who with.
Recent political developments, including around the FOFA legislative process, have fuelled the uncertainty which had already been building around certain key aspects of the legislation. However, one aspect which is certain is that the accountants’ exemption will be replaced with a requirement for licensing under the Corporations Act. This aspect will not be changing, and the government has made that very clear.
In other words, accountants have to accept the changes and get on with deciding how to respond to them.
So what has the response been so far? Early indications from various industry surveys suggested that 30 per cent of accountants were interested in getting licensed in 2013, and 25 per cent in 2014. If these figures are extrapolated across the profession, then those estimates do not seem to have eventuated.
With respect to the limited licence, Treasury had estimated that about 10,000 accountants would apply; so far, about 20 to 30 have obtained a limited licence, although it is still early in the transition period.
This figure may improve dramatically once accountants and others realise that the requirements for applying for a limited licence are not as onerous as they were at the beginning of the transition period. To its credit, ASIC has made the application process more practical, and has issued extensive guidance on how to apply. Compliance once a licence has been granted is another matter, however, and what some accountants may not fully realise is that about 90 per cent of the Corporations Act applies to the limited licence, including the licensing obligations in section 912A.
The Institute of Public Accountants conducted a survey at the end of 2013 to gauge the intentions of our practitioner members, over 80 per cent of whom work in tax, superannuation and SMSFs. The survey found that 39 per cent of members said they were interested in getting licensed in 2014/2015, while another 39 per cent said they were interested in getting licensed close to June 2016. Forty per cent are already RG146-compliant, though the confusion seems to be more around which education provider to choose. Seventeen per cent said they were going to get their own licence, while 56 per cent said they were not sure about who they were going to get licensed with.
How have accountants responded to the messaging that they should consider financial services because (tax) compliance work is dwindling? The results from a comprehensive survey conducted by the global accounting body (IFAC) released in 2013 showed interesting results for Australian small to medium practices (SMPs). Thirty-six per cent said the fastest growing source of new revenue is tax; 27 per cent said advisory and consulting services; 27 per cent said accounting/compilation services; and 10 per cent said audit.
Financial services are only a portion of the 27 per cent included in advisory and consulting services. Perhaps accountants believe other types of services are going to drive revenue, while recognising that they still need to be licensed, especially to continue to deal with SMSFs. Or perhaps it’s easier to grow revenue from areas where they already possess expertise and experience.
What do clients think about their professional service providers? A survey in 2013 found that of the SMSF investors currently using an accountant solely for tax advice, 45 per cent said they would consider using them for financial and investment advice if they offered it. This is a huge opportunity for accountants, but it may require different training and expertise and it certainly requires financial services licensing.
In another six months it will be interesting to see how many more accountants have become licensed and whether the early indications are eventually realised. There might be some clients out there who hope so.
Vicki Stylianou, executive general manager, public affairs, Institute of Public Accountants