In this guide
Taking on the role of an SMSF trustee can be challenging, leading many trustees to rely on professional service providers for assistance 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 funds 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 would usually approach their accountant for assistance regarding their fund, as it was probably their accountant who set up that SMSF for them. At the time, the “accountants’ exemption” of the Corporations Regulations allowed accountants to provide advice on 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 in place on the areas of advice that accountants can provide to SMSF trustees. Accountants can only provide advice on certain SMSF-related matters.
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As an SMSF trustee, you need to ensure you are getting assistance 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 Australian Financial Services Licence (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.
If your accountant does not hold an AFSL, or is not authorised under another 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, or be authorised under another AFSL.
When you need to use a licensed accountant
Only accountants holding an AFSL can provide personal advice such as:
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- 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
- Contributions
- Recommend additional super contributions
- Suggest establishing a salary-sacrifice arrangement
- Provide guidance on which fund you should contribute to
- Pensions and withdrawals
- Recommend starting a super pension or transition-to-retirement 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
- 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.
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 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
- 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 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
What account authority should my accountant have?
The following question was sent in by a member for one of our Q&A webinars.
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.
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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.
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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