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End of financial year 2017: Is your accountant licensed?

Glenn Freeman  |  30 May 2017Text size  Decrease  Increase  |  
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Just as you wouldn't want to jump in a taxi (or Uber) driven by an unlicensed driver, you shouldn't trust a self-managed super accountant without an Australian financial services license, especially given recent changes to super laws.


The changes in the superannuation reform package, announced in the 2016-17 budget, will take effect from 1 July 2017--less than eight weeks from now.

As Morningstar's Peter Warnes wrote in a recent Your Money Weekly newsletter: "My accountant connections suggest the reforms will have widespread ramifications and will raise billions in revenue for the government."

"They urge those affected, and there are many, to ensure they have accountants with a financial services licence. In general, financial advisers are not tax experts. The taxation implications are complicated, far-reaching, and if not properly addressed, could prove costly in the long term."

Since 1 July 2016, the Australian Securities and Investments Commission (ASIC) has required all accountants providing SMSF advice to hold either a full or limited Australian financial services license.

Despite a long-running campaign by various groups, including CPA Australia, Chartered Accountants Australia and New Zealand (CA), and the SMSF Association, many accountants have not taken the necessary steps to either obtain their own AFSL or partner with a licensed entity.

"For example, if the accountant has chosen not to get a license, they may need to refer you onto a financial planner or another accountant, whereas in the past, the accountant may have been able to deal with everything in-house," says Sonia Cruze, a senior consultant with The Fold Legal.

Under the previous system, which expired last June, accountants were exempted under the Future of Financial Advice legislation, and were allowed to give advice on establishing or winding up an SMSF.

What should you do?

You should ask your accountant if your existing service agreement has changed. Cruze says to ask: "Are you licensed, and can you continue to give me the advice that you have in the past? Or will I have to go to another professional for SMSF advice?"

"It could impact you if you've got ongoing service agreements in place ... where you can contact the accountant and just ask questions any time."

Cruze suggests this would also be a good time to ask whether the accountant will be passing on any additional fees for SMSF advice as a result of either referring them to another accountant or adviser, or to cover the additional licensing costs of the existing accounting business.

Compensation for bad advice

Brian Hor, special counsel, superannuation and estate planning at Townsends Lawyers, suggests if an unlicensed accountant provides bad SMSF advice resulting in a material loss, it could affect your chances of receiving compensation.

"The most important issue would be whether the accountant has sufficient professional indemnity (PI) cover if they inadvertently strayed into the realm of providing financial advice, or provided advice beyond the scope of a limited license, for instance," Hor says.

"If the advice is wrong, and there's loss, who can you claim against? Who's behind the accountant if they don't have sufficient assets of their own? To me, the PI aspect is probably the most critical."

Liz Ward, head of education at the SMSF Association, also believes the PI insurance aspect is critical if accountants have not made licensing arrangements.

"If they're opening their mouth to SMSF trustees on the provision of advice, they would be outside the scope of their insurance. You have to make sure that whoever is giving you advice, whether a planner or accountant, is licensed to provide that."

How to check on your accountant

ASIC's Financial Adviser Register at www.asic.gov.au is a good first starting point--beyond simply asking your accountant. By typing in a business name or surname, you can check the accountant's license status and also see any disqualifications or regulatory breaches.

"It would be good for trustees to be checking out that publicly available information ... and to check what plans the accountant has for SMSF advice after 1 July," says Ward.

"The Financial Adviser Register will give you the terms of their insurance, their licensee, and their history and any breaks or breaches."

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Glenn Freeman is a senior editor at Morningstar.

© 2017 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'class service' have been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/s/fsg.pdf. Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782 ("ASXO"). The article is current as at date of publication.

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