Australia: Part I: I’m an accountant and the limited licence regime is approaching. What licence do I need?

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 series.

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 processing.

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 point).

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.