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Home / SMSFs / SMSF admin and compliance / What advice can your accountant provide for your SMSF?

What advice can your accountant provide for your SMSF?

Garth McNallyGarth McNally
Updated

Taking on the role of self-managed super fund (SMSF) trustee can be challenging, leading many trustees to rely on professional service providers for help with the administration and compliance aspects of their fund.

Although SMSFs are often referred to as ‘do it yourself’ (DIY) funds, this couldn’t be further from reality. All SMSF trustees will, at some stage, need to engage professional service providers.

This could be to carry out the annual compliance audit or to prepare and lodge the fund’s financial statements each year. Advice may also be sought on investment options or the rules and regulations around borrowing within super.

Prior to 30 June 2016, SMSF trustees typically approached their accountant for help with their fund, as it was probably their accountant who set up the SMSF for them. At the time, the ‘accountants’ exemption’ of the Corporations Regulations allowed accountants to provide advice on the setting up and winding up of SMSFs without needing to hold an Australian Financial Services Licence (AFSL).

As you would no doubt be aware, this has changed and there are now restrictions on the areas of advice that accountants can provide to SMSF trustees.

As an SMSF trustee, you need to ensure you are getting help from someone licensed and qualified to do so. But what matters can your accountant assist with?

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, but if the financial advice and services involve personal advice, the accountant must hold an AFSL or be authorised under another AFSL.

This is the same licence financial advisers are required to hold to provide personal advice about financial products and services.

Learn more about the different types of financial advice available.

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

In these instances, you would need to direct the accountant to carry out these tasks on your behalf, and you will probably be asked to sign off that they are acting under your direction and that no advice has been provided.

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

The same applies when you need advice or a recommendation on purchasing or selling a particular investment or insurance product.

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When you need to use a licensed accountant

Only accountants holding an AFSL, or those authorised or licensed under another AFSL, can provide personal advice such as:

  1. SMSF establishment
  • Recommendations to 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
  1. Contributions
  • Recommend additional super contributions
  • Suggest establishing a salary-sacrifice arrangement
  • Provide guidance on which fund you should contribute to
  1. Pensions and withdrawals
  • Recommend starting a super pension or transition-to-retirement (TTR) pension
  • Calculate the super pension amounts needed to meet your income requirements based on your account balance, life expectancy and estate plans
  • Organise ad-hoc lump sum withdrawals
  • Recommend rollovers out of an SMSF
  1. Investment assets
  • Recommend purchasing property through your SMSF
  • Prepare a tailored investment strategy for the SMSF
  • Recommend specific assets to buy (or sell) when establishing an SMSF, including basic deposit products and cash management accounts
  • Recommend establishing a limited recourse borrowing arrangement (LRBA)
  1. Estate management
  • Organise a binding death benefit nomination
  • Recommend appropriate beneficiaries for a binding death benefit nomination

Good to know

If your accountant doesn’t hold an AFSL, they can’t 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:

  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 the 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
  1. SMSF administration
  • Advise on SMSF administration and operational issues, including the 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 for some SMSFs, undertake the 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

Need to know: SMSF annual audits

Changes were introduced from 1 January 2020 relating to the independence of SMSF auditors.

These changes restrict SMSF auditors from carrying out audits for SMSFs unless they are truly independent of that SMSF and members of the fund.

A significant outcome for most SMSFs is that the annual audit function can no longer be carried out by the accountant for your SMSF or anyone working at the same firm or connected to that firm.

This has resulted in most SMSF trustees now needing to engage an additional service provider separate to their fund accountant or administrator.

  1. Pensions
  • Explain the tax implications of a TTR 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
  1. 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 specific shares (unless they 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.

What account authority should my accountant have?

The following question was sent in by a member for one of our Q&A webinars.

Q: My accountant, the SMSF administrator, has requested full third-party authority for our fund account. Is this common practice?

A: This is something that’s starting to happen a lot a lot more when it comes to the automation and software, which is now applicable in the SMSF space. I’d ask you to step back and have a think about what authority you’re being asked to give and what authority you’re actually giving to your accountant or your SMSF administrator.

For instance, is the authority allowing a person to access information relating to you or your fund. What I mean by that is, for instance, being able to contact a fund manager and get relevant information about the investment that your fund has in that managed fund, or contact a bank, for instance, and get information about the bank account and the interest rates. That’s access to information, and its information that the accountant or administrator will probably need. I don’t necessarily see an issue with that. It could also be an authority to make inquiries on your behalf. For instance, on maturity of a term deposit for your fund, what might happen? Might it auto-roll over? Might it be paid to your SMSF bank account? It’s inquiries on your behalf. Again, it probably would be relevant and I suppose allowable to I believe that.

The big one, though, which probably removes the requirement to have the access to informational inquiries, is this new concept of allowing direct data feed into your account or your SMSF administrator’s software programme. For instance, your bank account directly feeds information into the software of your accountant or your SMSF administrator, giving that information that they need to process your fund. It could be ASX listed shares providing information directly into the software around dividend payments and the components that make up that dividend. Direct data feeds has probably superseded those other two because it just feeds information direct from that third party to your provider. Again, probably not too much of an issue with that.

But then if you look at some authorities, they actually give the other party authority to transact on your account or authority to update or change your details to act as if you are the one acting. And of course, that’s in red because I don’t think that would necessarily be all that appropriate to let that third party, that authority holder, do those things on your behalf or for you.

So I think the gathering information, the making inquiries is okay, but the transacting, I would certainly draw a line against and say, no, that’s probably not appropriate.

Some other things that I believe you would need to consider when it comes to giving third party authority is who can action that authority? Who has the right to action it? For instance, have you given authority to an individual or does it allow access by all workers and all employees of that entity, of that firm, of that employer, no matter where they’re located? So for instance, what if that accounting firm, what if that SMS administrator used the sources of someone overseas? Are you giving that authority for someone else to make those requests that information request or that data feed to everyone. It’s just something that I think you need to be aware of. It’s something I would ask, who am I actually authorising and allowing to do these things?

And the last point to note is how long would that authority last? In a lot of cases, it could be 12 months, it could be 24 months.

I’d be reluctant to sign or give authority with an open-ended date. I’d want to have that refreshed regularly just so I’m kept in the loop. So I hope that answers your question around that. Think about what you’re giving authority on, who you’re giving that authority to, and how long that authority lasts. I hope that helps. Do that by reviewing the authority itself once you’ve signed it and keep a copy of it so you can go back and say, yes, I understood exactly what it was that I was signing and how it applies.

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 agent qualified to provide tax advice.

Will we ever see changes to the current advice rules?

There have been proposals lobbied to the federal government by professional bodies to allow accountants to provide greater levels of advice on SMSFs, beyond what is currently allowed.

This would allow qualified accountants to provide a level of strategic or specific advice without the need for either full or limited advice under an Australian Financial Services Licensee.

At the moment, these are simply proposals. No changes to the current model have been announced or even entertained by the current government, as their attention seems to be more focused around the quality of advice review (QAR) and the issues that it has raised.

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.

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About the author

Garth McNally
Garth McNally
Garth has worked in the Australian Superannuation industry for over 20 years with a specific focus on self-managed super funds. He provides ongoing support and training to individuals as well as to professionals working in the superannuation area, including advisers, accountants and lawyers. He is a regular contributor to industry publications and to the leading professional bodies including Chartered Accountants Australia & New Zealand (CA ANZ).
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Responses

  1. Charlie Avatar
    Charlie

    Important note is that an Accountant sub-consciously priortizes tax savings as the tool for savings/accumulating, whereas a Financial Adviser considers ‘both’ tax savings as well as other financial goals (long-term strategies view, growth via using specific investments/models, personal goals of their clients, etc).
    Glad that the government fixed it.

  2. Neil Brissett Avatar
    Neil Brissett

    Shouldn’t the dates mentioned in the article as 01/07/16 be 01/07/17 ??

    1. SuperGuide Avatar
      SuperGuide

      Hi Neil
      Thanks for your email. The accountants’ exemption was repealed on 30 June 2016, not 30 June 2017.
      Cheers
      The SuperGuide team

  3. Les Avatar
    Les

    I didn’t read the above article that way, i.e. “… new rules mean accountants can
    no longer help with establishing and winding up an SMSF unless they are licensed.”
    So, we just need to ask our accountant whether or not they are licenced under the new rules.

  4. David Avatar
    David

    The first thing that strikes me about this is that two professionals will be required for every SMSF, whereas previously one was sufficient. And two professionals means two lots of fees. 🙁

    A second is that many people have avoided financial advisers because of the appalling reputation they have. It now looks like we will have to have a financial advisor, even if we are making our own decisions and do not need one. This seems ludicrous!

    1. Chris Avatar
      Chris

      David – If you want service, you have to pay for it.
      There’s bad eggs in every industry – no more so in Financial Planning.

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