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What licensing issues are looming for accountants?

By Chris Morcom
22 September 2015 — 2 minute read

With the new licensing arrangements taking effect on 1 July 2016, accountants should be aware of the major risks and concerns relating to the preparation process for the end of the accountant’s exemption.

Consequences of the slow take-up

Recent ASIC statistics show a slow take-up by accountants of the new limited licence, with only 160 applications having been made. However, only approximately 60 of these have been granted a licence. According to ASIC, they are not receiving the substantial evidentiary documentation from applicants at the time of application required to demonstrate compliance with the knowledge requirements of RG146.

ASIC can assess the application within four weeks where an application is in good order, but if further details are required due to insufficient information being given, it will take longer. Accountants who do not lodge applications which meet ASIC's requirements by 1 March 2016 run a significant risk their application will not be assessed before 30 June 2016. And ASIC has been very clear: there are no proposals to extend the 30 June 2016 cut-off date since accountants have been able to apply for this type of licence since 1 July 2013.

For a limited licence, those accountants with a current practising certificate do not need to satisfy the experience requirements that apply to normal licensee applications. This exemption will end on 30 June 2016, providing another incentive to act soon.

Concerns with authorised representative arrangements

As an alternative to getting their own licence, accountants could opt to become an authorised representative of an existing Australian Financial Services Licence (AFSL) holder. However, this too can be fraught with complexities and even unscrupulous arrangements. I have seen quoted fees ranging from $5,000 to $15,000 a year to become an authorised representative and in one instance, the accountant was required to hand over their entire client list to allow the licensee to data-mine for potential clients. They were then locked into referring all clients requiring advice outside the limited licence scope to the licensee.

This is neither beneficial to the accountant, since the arrangement may not align with their wishes to maintain their independence, nor the consumer since the referral is unsolicited and advice may not be given in their best interest.

I urge those looking to continue to advise on SMSFs to actively consider their and their business position and their values before making a decision about a suitable option.

An alternative to being licensed could be to align with a trusted AFSL holder and refer clients to that licensee for appropriate financial planning advice. The client then benefits from the expertise of two professionals acting in their best interest.

The risks of advice without a licence

Under the new legislation, accountants can still provide some factual information and tax advice in relation to SMSFs without having a licence. Care needs to be taken though that the advice given does not cross the line.

Non-licensed accountants can continue to assist their clients to rollover funds to an SMSF if the client has already made that decision. They can also advise on the tax issues in relation to certain financial products, such as the fully franked nature of share dividends. However, conditions apply, including the need to provide a disclaimer. Those who hold a licence or operate as an authorised representative cannot use this exemption to provide advice without providing a Statement of Advice.

Effectively, a non-licensed accountant can talk to their clients about the facts of a financial product and the taxation implications, but they cannot say “do it now”.

Non-compliance with this change in legislation is a dangerous move since it risks a breach of the Corporations Act. The penalties range from significant fines to loss of professional standing.

Chris Morcom, director, Hewison Private Wealth


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