SMSFs: What advice can your accountant provide?

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What are the advice rules for accountants?
When you need to use a licensed accountant
What services can accountants without an AFSL provide?
Who can provide tax advice to an SMSF?
For more information…

Being the trustee of an SMSF can be challenging. But while many SMSF trustees turn to their accountant for assistance, they can only provide advice on some SMSF-related matters.

To keep your fund compliant, you need to ensure you are getting assistance from someone licenced and qualified to do so. But what matters can your accountant assist with?

To help SMSF trustees navigate this tricky area, SuperGuide has compiled a checklist to help you work out if your accountant is the right person to ask for help.

Background: Before explaining who can do what, it’s worth understanding the background.

Until 30 June 2016, accountants could provide a range of services to SMSFs under the so-called accountants’ exemption contained in Regulation 7.1.29A of the Corporations Regulations 2001. This exemption allowed accountants to provide advice on the establishment and winding up of SMSFs without needing to hold an Australian Financial Services Licence (AFSL).

As part of the financial advice reforms (FoFA) introduced in 2016, the government removed this exemption and made accountants subject to the strict rules relating to financial advice.

What are the advice rules for accountants?

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.

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When you need to use a licensed accountant

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

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

Contributions

Recommend additional super contributions
Suggest establishing a salary sacrifice arrangement

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

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)

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.

Good to know: If your accountant doesn’t hold an AFSL, they cannot get you to sign a form stating you understand the advice they are providing is from an unlicensed source. Disclaimers or waivers cannot override the licensing requirements in the Corporations Act.

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:

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

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

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

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

Need to know: Although accountants without an AFSL are permitted to provide execution-only services (like implementing an LRBA or investing assets) to an SMSF, they may require a Statement of Advice (SOA) from a licensed adviser before they will do so. This is to prove the accountant did not provide you with personal advice.

You may also find accountants who don’t hold an AFSL unwilling to comment on product recommendations in an SOA. However, they are still able to comment on the tax implications of making such an investment.

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.