Government Announces Replacement for the Accountants’ Exemption and Further Details of the SMSF Auditor Registration Regime
Announcements from the government over the weekend provide further clarity for accountants regarding the future direction for providing financial advice to their clients. The announcements are long overdue and provide useful guidance for the future, although the details will need to be worked through once draft regulations are released later this year.
We are fully committed to developing strategies, tools and solutions that respond to these latest announcements for the benefit of all stakeholders.
Turning now to the specifics of the announcement:
Background
The Corporations Regulations currently allow accountants the opportunity to provide limited or restricted advice around superannuation without the need to hold an Australian Financial Services Licence (AFSL), or hold authorisation from an AFS Licensee.
Under current legislation an accountant may provide a range of exempt services including advice given for the sole purpose of complying with the SIS Act and Regulations, and theSuperannuation Guarantee (Administration) Act (such as advising to make superannuation guarantee contributions on behalf of their employees). In addition, the “accountants’ exemption” allows a “recognised accountant” to recommend a person establish or dispose of an interest in a self-managed superannuation fund.
The panel that conducted the Super System Review (the Cooper Review) recommended that the current “accountants’ exemption” should be abolished and that all those advising on self-managed superannuation funds should be uniformly licensed by the Australian Securities and Investments Commission (ASIC). The final report of the Cooper Review that included this recommendation was delivered to the government in June 2010.
What Has Been Announced
Over the course of the past two years, the government has been negotiating the abolition of the accountant’s exemption and the development of an alternative licensing regime for accountants.
The long awaited details of the new licensing regime were released to the public on Saturday, 23 June 2012. A copy of the Media Release can be accessed here: Media Release No. 036.
A new limited AFSL will enable accountants to give “class of product advice” on superannuation, self-managed superannuation funds, basic deposit products, general and life insurance and simple managed investment schemes. The limited licence arrangement will not allow specific product recommendations to be made. The new licence will also extend the consumer protection provisions of the Corporations Act, such as the “best interest duty” to financial advice provided by accountants.
The proposed changes will allow accountants the opportunity to provide a broader range of financial services to their clients than are currently available under the accountant’s exemption. In fact financial planners only seeking to provide strategic advice may also seek to be licensed under the proposed limited licence regime.
It is anticipated that accountants seeking to be licensed under the limited license regime will need to undertake additional training as prescribed in ASIC’s Regulatory Guide 146, but more details will become apparent once the draft regulations are released.
What Happens Now?
A streamlined transition period will commence from 1 July 2013 and extend until 1 July 2016. The current accountants’ exemption provisions contained in the Corporations Regulations (7.1.29A) will be abolished from 1 July 2016.
There will be an opportunity for public consultation once the draft regulations are released in the second half of 2012.
Now that more details have been released in respect of the proposed limited licensing regime, further developmental work on a limited licence and authorisation solution will be undertaken.
We commit to providing further updates to you as developments occur.
SMSF Auditor Registration
The government has previously announced that SMSF auditors will be required to be registered with ASIC.
The Media Release referred to above also provides further details on the SMSF auditor registration regime.
To be registered as a SMSF auditor, applicants will need to meet the following requirements:
- Hold a tertiary accounting qualification that includes an audit component or successfully completed study in audit as part of a professional accounting body program;
- Meet a fit and proper test;
- Hold professional indemnity insurance;
- Have 300 hours of SMSF audit experience in the three years prior to registration, subject to transitional arrangements (see below); and
- Pass a competency exam, subject to transitional arrangements.
All SMSF auditors must be registered with ASIC by 1 July 2013, and applications for registration can be made from 31 January 2013.
Transitional arrangements will excuse existing SMSF auditors from having to sit the competency exam where they have signed off on 20 or more audits in the 12 months prior to applying for registration. Furthermore, existing auditors who have signed of an SMSF audit within 12 months of registering will be exempt from the hours based experience requirement when registering.
Ongoing professional obligations for SMSF auditors will include:
- Undertaking minimum Continuing Professional Development every three years; and
- Compliance with APES 110 – Code of Ethics for Professional Accountants.
We encourage those interested to send in your opinions and welcome all feedback and queries relating to this matter.