SMSFs: What advice can your accountant provide?

Put simply, accountants can provide a wide range of advice and services to the trustees of an SMSF, however, if the financial advice and services involve personal advice, the accountant must hold an Australian Financial Services Licence (AFSL).

This is the same licence financial advisers are required to hold to provide personal advice about financial products and services. (For more about financial advice, read SuperGuide article What are the different types of financial advice available?)

If your accountant does not hold an AFSL, they can still assist you with basic SMSF administrative tasks (such as the paperwork for fund establishment and rollovers) and provide factual information about investments and strategies.

If you want advice and information about the suitability of an investment product or strategy for the SMSF, your accountant must hold an AFSL.

When you need to use a licensed accountant

Only accountants holding an AFSL can provide personal advice such as:

1. SMSF establishment

• Establish or wind up an SMSF
• Advise on the appropriateness of an SMSF for your personal circumstances
• Explain the suitability of different super investment options and funds
• Recommend one super structure over another
• Suggest consolidating or rolling over assets into a single fund

2. Contributions

• Recommend additional super contributions
• Suggest establishing a salary sacrifice arrangement

3. Pensions and withdrawals

• Recommend starting a super pension or transition-to-retirement pension (TRIP)
• Calculate the super pension amounts needed to meet your income requirements based on your account balance, life expectancy and estate plans
• Organise an ad hoc lump sum withdrawal
• Recommend rollovers out of an SMSF

4. Investment assets

• Recommend purchasing property through your SMSF
• Prepare a tailored investment strategy for the SMSF
• Recommend specific assets to buy when establishing an SMSF, including basic deposit products and cash management accounts
• Recommend establishing a Limited Recourse Borrowing Arrangement (LRBA)

5. Estate management

• Organise a binding death benefit nomination
• Recommend appropriate beneficiaries for a binding death benefit nomination. (For more on death benefit nominations, read SuperGuide article Who gets your super when you die? A guide to death benefit nominations.)

Source: Information compiled by author from material produced by CPA Australia and Chartered Accountants Australia and New Zealand, including ‘Financial advice and Regulations: Guidance for the accounting profession’ September 2017.

What services can accountants without an AFSL provide?

Despite these rules, accountants without an AFSL are still able to undertake many routine services for an SMSF.

In addition to providing factual information about financial services and products (general advice), they can help with:

• Taxation advice
• Traditional accounting activities
• Broad asset allocation advice
• Referrals

If your accountant does not hold an AFSL, they can provide services such as:

1. Super basics

• Explain factual information about super, including choice of fund and contribution limits (concessional and non-concessional)
• Explain the benefits of consolidating super assets into a single fund (but not recommending a specific super fund)
• Advise which assets can be contributed into an SMSF prior to establishment, provided the advice is to ensure SIS Act compliance
• Explain rules for one-off lump sum withdrawals
• Highlight the insurance coverage risk in changing super funds
• Advise on adding new members to an existing fund

2. SMSF administration

• Advise on SMSF administration and operational issues, including suitability of a corporate or individual trustee
• Advise on compliance with super reforms
• Provide compliance information about in-house asset rules
• Maintain SMSF trustee and member records
• Prepare annual returns, allocate expenses or undertake annual audit
• Arrange paperwork from service providers, such as deeds, corporate trustee and rollovers
• Highlight deficiencies in, and monitor compliance with, the SMSF’s trust deed
• Track member account balances and investment valuations
• Explain death benefit options and their tax treatment

3. Pensions

• Explain the tax implications of a transition-to-retirement pension (TRIP) without mentioning a specific fund or required contributions
• Set up a super pension on the SMSF trustee’s instructions
• Provide calculations on minimum and maximum pension amounts, but no guidance on how much to withdraw to meet your income needs
• Administratively commute a super pension from an SMSF or set one up on instructions from the client

4. Investments

• Document the SMSF’s investment strategy
• Provide a generic investment strategy template to ensure compliance (including broad asset allocation advice) but not advice on specific asset selection
• Explain SIS Act investment restrictions (such as in-house asset rules)
• Value SMSF assets
• Assist with rolling over assets (on trustee instructions)
• Recommend holding direct shares (as an asset class) but not recommend the specific shares (unless hold an AFSL)
• Arrange off-market transfers
• Implement a Limited Recourse Borrowing Arrangement (LRBA)
• Implement strategy or product placements (on trustee instructions)
• Recommend buying an investment property for negative gearing purposes

Source: Information compiled by author from material produced by CPA Australia and Chartered Accountants Australia and New Zealand, including ‘Financial advice and Regulations: Guidance for the accounting profession’ September 2017.

Who can provide tax advice to an SMSF?

If all this sounds rather complicated, you may be thinking the easiest solution is to go to a financial adviser for all your SMSF’s financial and tax advice needs – but it’s not that simple.

Since 1 January 2016, financial advisers offering advice on how the taxation laws (income tax, superannuation and SMSF laws) apply to a client’s personal circumstances must be registered with the Tax Practitioners Board (TPB) as a tax (financial) adviser. This means they need to meet the TPB’s ongoing education and experience requirements, plus remain a licensed financial adviser.

Many financial advisers are not registered as a tax (financial) adviser, so they are unable to provide advice about the tax implications of the products and strategies they recommend. Instead, they will refer you to an accountant or tax agents qualified to provide tax advice.

For more information…

For more information about SMSFs and financial advice, read SuperGuide articles:

• What happens when you meet with a financial adviser
• What are the different types of financial advice available?
• Independent financial advice: Why it’s important and how to find it
• Find an Australian independent financial adviser
• Financial advice: What are the risks and benefits?
• How to evaluate whether an SMSF is right for you
• SMSF compliance: A guide to trustee responsibilities
• What are the SMSF borrowing rules?
• How to compare super funds in 7 easy steps
• Super advice: How to find a suitable financial adviser
• Who to turn to if you have a problem with your super or financial adviser
• 3 steps to making a complaint about your super fund