The end date for the accountants' "SMSF
recommendation" exemption has been set. Will you need to apply
for a limited Australian Financial Services Licence (AFSL)? What
are your other options? We demystify the changes in this blog
As industry moves towards a clearer understanding of how things
will look post 1 July 2016, it appears that the transition to
licensing is a four-stage process. Curiously, an analogy can be
drawn with our digestive system's four stages of food
Stage 1: What is a limited licence?
This is the ingestion stage. Lots of guidance has been released,
some from ASIC (Info 179), some from the CPA and ICAA (the Green
Book), some from planning institutions, and some from industry
consultants (like Kath Bowler at www.kathbowler.com.au). There
are also plenty of blogs and articles we've released that we
invite you to, uh, chew on.
Stage 2: Which path will accountants choose?
This is the digestion stage, as accountants (and licensed
advisers) consider the pros and cons of whether the accountants
will provide (a) no licensed activities at all; or (b) some very
specific licensed activities; or (c) fuller licensed activities.
Also, items (b) and (c) can be achieved by obtaining an AFSL or
simply becoming authorised by another AFSL. Understanding (and
digesting) the minutiae is important in helping accountants make
the decision. For example, recommending that an SMSF client move to
pension phase is likely to need an AFSL under the new regime.
That's a big consideration for some unlicensed accountants.
Our next blog will delve deeper into considerations of when a
limited or full AFSL might be the right choice for you.
Stage 3: What education do accountants need?
This is the absorption stage, requiring lots of training for the
detail to sink in, and for threshold qualifications to be achieved.
For example, advising retail clients under an AFSL triggers RG 146
requirements, which takes time to obtain. Understanding your AFSL
obligations also takes a big investment of resources, including
training. Even providing no financial services whatsoever after 1
July 2016 requires in-depth training about what activities are now
out-of-bounds (the CPA and ICAA's Red Book is useful on this
Stage 4: Implementation and timing?
This is the "egestion of waste" stage. This is where
unlicensed accountants effectively eject their existing SMSF
advising and dealing practices, and replace them with new
practices. (Decorum stops me from taking this analogy any further.)
The key to this stage is timing, because there are very few
incentives to get a licence before the last minute. If accountants
get one now, they'll need to complete a full SOA for SMSF
advice that, before 1 July 2016, would not be required. Also,
getting an AFSL for the first time is a steep learning curve with
lots of new behaviours that need to be woven into existing business
practice. Even choosing to stay outside of the new regime will
require implementation of significant changes to your business.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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