Australian Securities and Investments Commission -

Frequently asked questions about financial services regulation

QFS 123
I am an accountant. What advice can I provide about self managed superannuation funds (SMSFs) and related activity under reg 7.1.29?

This FAQ provides guidance to about whether an accountant needs an AFS licence to conduct various activities in relation to SMSFs.

Accountants should not assume that their activities fall outside the scope of AFS licensing merely because they were activities undertaken in the past without a licence.

Unless covered by an exemption, if you advise or deal, or provide any other financial services, in relation to SMSFs, you will need an AFS licence. The maximum penalty, if convicted of carrying on a financial services business without an AFS licence, is $22,000, a two-year term of imprisonment, or both. Reg 7.1.29 and reg 7.1.29A of the Corporations Regulations provide that, for accountants, certain conduct is taken not to be the provision of a financial service under the Corporations Act (the Act). This FAQ provides guidance about how these regulations apply to services provided by accountants in relation to SMSFs.

For a general discussion of when an accountant may need an AFS licence see our FAQ - QFS 10 - Do the AFS licensing requirements apply to accountants?

Part A: Summary - What can and can't a recognised accountant do without needing to hold an appropriate AFSL authorisation?

What can I do?
In general, if you are a member of the CPA, ICAA or NIA (a recognised accountant), you may provide some financial services in relation to SMSFs without needing to hold an AFSL. There are important restrictions on the types of advice and other services that you can give, and the circumstances in which you can give those services (which are referred to in more detail below). However, in general:

1. You can give financial product advice in relation to the establishment, operation, structuring or valuation of a SMSF to a client who controls or will control the management of the SMSF (eg a member who is or will become a trustee of the SMSF ('member trustee') or a director of a corporate trustee of the SMSF ('member director')). For example:

You can provide advice about administration and operational issues, including how to establish a SMSF, the addition of new trustees and members and valuation of the fund assets.
You can recommend that your client establish a SMSF.
You may be able to recommend that your client join a SMSF if that recommendation is reasonably necessary to, and an integral part of, advice about the establishment, operation, structuring or valuation of the fund.
If your client is already a member of a SMSF, you can recommend that your client dispose of their interest in the SMSF (but you cannot recommend that they switch into another type of superannuation fund).
You can provide advice that is for the sole purpose of ensuring compliance with particular superannuation legislation. This includes advice on meeting the in-house asset rules and modifying contribution levels due to changes in the superannuation guarantee level. It does not include advice on the investment strategy of the SMSF. You cannot recommend that a client's employer cease making superannuation guarantee contributions to another fund and start making superannuation guarantee contributions to the SMSF, as this advice would not be for the sole purpose of ensuring compliance with the legislation.

2. You can organise for a client who controls, or will control, the management of a SMSF (eg a member trustee or a member director) to acquire or dispose of interests in a SMSF by:

Organising for your client to establish a SMSF and join a SMSF if reasonably necessary to and an integral part of the advice about the establishment of the SMSF.
Processing the transfer or rollover of funds into, or out of, a SMSF where the decision to transfer or rollover the funds has already been made (but you cannot recommend the transfer or rollover).

3. You can give financial product advice in the course of advising on taxation issues, such as the taxation implications of holding an interest in a SMSF.

If the service that you provide is financial product advice, you must give your client a written warning that you are not licensed to provide the financial product advice and that they should consider taking advice from an AFS licensee before making a decision.
You must also ensure that, when providing these financial services, you do not engage in misleading or deceptive conduct.

What can't I do?
You will not be able to do the following things without holding an AFS licence, even if you are a recognised accountant:

1.	You cannot give any advice that relates to the particular assets or investment strategy of the SMSF, including whether the trustee should acquire or dispose of certain financial products or classes of financial product.
2.	You cannot recommend that the client dispose of interests in another type of superannuation fund (such as an employer fund or public offer fund), or any other type of financial product, even if the recommendation is for the client to dispose of that product in order to establish or join a SMSF (for example, by rolling over funds from the other superannuation fund to the SMSF).
3.	You cannot recommend that the client change the investment strategies or contribution levels of another type of superannuation fund. That is, you cannot recommend that the client stop contributing to an existing superannuation fund and instead make contributions into a SMSF. You cannot give advice to switch between investment options.
4.	You cannot recommend that your client should not invest in other types of financial product.
5.	You cannot recommend that your client join an existing SMSF unless that recommendation is reasonably necessary to, and an integral part of, advice about the establishment, operation, structuring or valuation of the fund.

Part B: What restrictions apply to the exemptions in regs 7.1.29 and 7.1.29A?

Reg 7.1.29 and reg 7.1.29A of the Corporations Regulations provide that certain financial services are taken not to be financial services under the Act for licensing purposes. This means that the licensing provisions of the Act will not apply if you provide those services. Other obligations will apply, however, such as the requirement to give the warnings specified in reg 7.1.29 and prohibitions on misleading and deceptive conduct.

However, there are a number of important restrictions on the reg 7.1.29 exemptions.

The main general restriction is that:

1.	the financial service that you provide (referred to in reg 7.1.29 as an *eligible service) must be provided in the course of conducting an exempt service*; and
2.	it must be reasonably necessary to provide the eligible service in order to conduct the exempt service; and
3.	the eligible service must be provided as an integral part of the exempt service.

Regs 7.1.29(3) to (5) set out a number of services that are exempt services. Exempt services that are relevant to SMSFs include:

providing advice about the establishment, operation, structuring or valuation of a SMSF: reg 7.1.29(5); or
arranging for another person to deal in interests in a SMSF: reg 7.1.29(3)(f); or
providing advice on taxation issues, including taxation implications of SMSFs: reg 7.1.29(4).

In addition, there are some specific restrictions on the circumstances in which a service will be an exempt service (and therefore on the circumstances in which exemptions are available for financial services provided in the course of conducting the different types of exempt services).

Specific restrictions: Advice on establishment of a SMSF etc, or arranging for the client to establish, join or leave a SMSF

If you are providing financial product advice in the course of advising a client on the establishment, operation, structuring or valuation of a SMSF, or you are arranging for a client to deal in interests in a SMSF, you can only rely on reg 7.1.29 if the following restrictions are met:

1.	The client is, or is likely to become, a trustee or a director of the trustee, an employer sponsor or a person who controls the management of the superannuation fund. For SMSFs, the client will therefore generally need to be a member who is a trustee of the SMSF ('member-trustee'), or a director of a corporate trustee of the SMSF('member director') or a person who will become a member-trustee or member director if the SMSF is established.
2.	No advice is given that:
	a) relates to the acquisition or disposal by the superannuation fund of specific financial products or classes of financial products; or b) includes a recommendation that a person acquire or dispose of a superannuation product (except where the recommendation is made by a 'recognised accountant' in relation to a SMSF: see reg 7.1.29A); or c) includes a recommendation in relation to a person's existing holding in a superannuation product to modify an investment strategy or a contribution level; unless the advice: d) is given for the sole purpose of ensuring compliance with the Superannuation Industry (Supervision) Act 1993 (SIS Act) (but not s52(2)(f) – investment strategies), the SIS regulations (but not SIS reg 4.09 – investment strategies) or the Superannuation Guarantee (Administration) Act 1992, and is reasonably necessary for that purpose.
3.	Any advice that constitutes financial product advice to a retail client is accompanied by or includes a written warning that you are not licensed under the Act to provide financial product advice and that the client should consider taking advice from the holder of an AFS licence before making a decision on a financial product (see also reg 7.6.01(e) and (ea) for the exemption covering mere referrals and its conditions).
4.	The advice is not for inclusion in an exempt document or statement under s766B(9) of the Act (eg by an expert).

Specific restrictions: Taxation advice
If you are providing financial product advice in the course of providing advice on taxation implications of SMSFs, you can only rely on reg 7.1.29 if the following restrictions are met:

1.	you will not receive a benefit such as a fee or commission (other than from the client or an associate of the client) as a result of the client acquiring a financial product, or a product within a class of financial products, mentioned in the taxation advice; and
2.	if the client is a retail client, the taxation advice includes, or is accompanied by, a written statement that: a) you are not licensed to provide financial product advice; b) taxation is only one of the matters that must be considered when making a decision; and c) the client should consider taking advice from a licensed person before making a decision on a financial product.

What is a recommendation?
Merely setting out options and discussing the benefits and disadvantages of each option will not necessarily involve a recommendation. A recommendation does not have to be express and no particular form of words is required. It is more likely that a recommendation may be inferred where an option is presented as the only option, or other options are described in terms that indicate that the adviser considers that they will not be suitable for the investor.

For example, the regulations allow a recognised accountant to give financial product advice in relation to the establishment of a SMSF where the client has already decided to set up the SMSF and dispose of interests in another superannuation fund (such as an industry fund) in order to do this. In this instance, you would only be asked for advice on administrative issues in establishing the SMSF and arranging for the rollover of funds from the industry fund to the SMSF. You would not be providing a recommendation about disposal of the client's interest in the industry fund.

However, if the client has not yet made the decision to dispose of interests in the industry fund, and you explain the superannuation options available, and the general benefits of the different types of fund, you should be careful that you do not imply that it would be appropriate for the client to dispose of their interests in the industry fund in order to set up a SMSF. In this instance, you could be making a recommendation about the disposal of interests in the industry fund, and would require an AFSL to engage in that conduct.

What is a "recognised accountant"?
"Recognised accountant" is currently defined in reg 7.1.29A(2) for the purposes of that regulation as meaning:

a member of CPA Australia who is entitled to use the letters 'CPA' or 'FCPA' , and who is subject to and complies with CPA Australia's continuing professional education requirements;
a member of the Institute of Chartered Accountants in Australia (ICAA) who is entitled to use the letters 'ACA' , 'CA' or 'FCA' , and who is subject to and complies with ICAA's continuing professional education requirements; or
a member of the National Institute of Accountants (NIA) who is entitled to use the letters 'FNIA' , ''FPNA', 'MNIA' or 'PNA' , and who is subject to and complies with NIA's continuing professional education requirements.

Part C: Do any other Corporations Act or ASIC Act obligations apply to me if I provide a financial service that is covered by reg 7.1.29?

Yes. Reg 7.1.29 only has the effect that the financial service that you provide is taken not to be a financial service for the purposes of Chapter 7 of the Act. You may still be providing financial services for the purposes of the ASIC Act, and you will therefore need to comply with the consumer protection provisions in Div 2 of Part 2 of the ASIC Act.

For example, you must not engage in conduct that is misleading or deceptive in relation to the financial services you provide, or conduct that is likely to mislead or deceive. You should note that this is an objective test and does not depend on any particular person in fact being misled. It is sufficient if your conduct is likely to mislead. It may be misleading or deceptive to suggest that you are able to lawfully advise about financial products for which you do not hold an authorization to advise.

EXAMPLE This example is illustrative only. It is not exhaustive and is not intended to imply any particular rule. Whether a person is entitled to the benefit of the exemption in regulation 7.1.29 will depend on the particular circumstances in each case

Mary is Peter's accountant. She is a Recognised Accountant. She set up Peter's business structure for him and prepares the business's accounts and tax returns. She reminds him that the law requires certain payments to be made for superannuation. Peter asks whether she can recommend what to do. Mary says that there are a number of options open, including establishing a SMSF and contributing to a public offer fund. She says that there are a number of considerations in deciding what to do. She says that, for example, SMSFs may suit people who have the capability and interest to play an active role in decisions about the assets underlying their superannuation interests (subject to compliance with investment restrictions) and public offer funds may suit those who want to rely on professional management expertise for those decisions. Mary says that, as she is not an AFS licensee, she cannot make a recommendation about what kind of superannuation fund Peter should arrange for contributions to be made to, and suggests he speaks to a holder of an AFS licence. However, as a Recognised Accountant, Mary can recommend whether Peter should or should not establish a SMSF.

Mary informs Peter than she knows an AFS licensee named Paul who is able to provide financial advice. Mary informs Peter than she does not receive any commissions or other benefits from Paul. Peter then goes to see Paul for advice about retirement planning. After a detailed analysis of Peter's personal circumstances, Paul recommends that Peter should establish a SMSF. Peter is concerned that he will not have the time or the skills to run an SMSF. Paul informs Peter than a SMSF does require time and effort on the part of the trustees and that all members of the SMSF must be trustees. Peter and Paul agree that Paul will advise Peter on the underlying investments of the SMSF, but Peter will get taxation and accounting advice from a suitably qualified person. Peter decides to retain Mary as his accountant and tax adviser, as he already has a relationship with her.

Peter asks Mary to set up a SMSF for him, and provide accounting and taxation advice in relation to establishment and operation of the SMSF. Peter explains that Paul has advised him to set up an SMSF and that he is satisfied that a SMSF is the best option for his superannuation. Mary, as a Recognised Accountant, also recommends that Peter establish a SMSF and informs him of his obligations as a trustee. She does not give advice about what investment strategies the SMSF should adopt.

What are the licensing implications for Mary and Paul?

Mary
If, in the course of establishing the SMSF for Peter, Mary arranges for the issue or the acquisition of a financial product, or gives financial product advice, this activity will be covered by reg 7.1.29 and not be a financial service if:

it was reasonably necessary for Mary to provide that financial service in order to give advice about establishment, operation, structuring or valuation of the SMSF or to arrange for dealings in the SMSF and the service was conducted as an integral part of that advice or arranging; and
Mary gives Peter a written statement that:
- she is not licensed to provide financial product advice; and
- Peter should consider taking advice from the holder of an AFSL before making a decision on a financial product.

The provision of factual information about the features of different kinds of superannuation products or the skills needed to be a director of the trustee of an SMSF will also not, of itself, be financial product advice. Mary may also give her opinion about the advantages and disadvantages of different kinds of superannuation products or about what qualities a trustee director should have, provided this opinion is reasonably necessary to, and an integral part of, advice about the establishment, operation or structure of the SMSF.

If Mary had recommended that Peter should not set up an SMSF, Mary could still provide factual information about the different types of superannuation fund structures, but could not make any recommendation about which type of superannuation fund Peter should join. For example, if Mary said that Peter should join a public offer fund, taking into account her view that Peter did not have the required skills to be a trustee director, this will be financial product advice and will not be covered by reg 7.1.29(5). Further, this recommendation will not be covered by reg 7.1.29A because it is a recommendation about a superannuation product other than a SMSF. More generally, the recommendation to join a public offer fund may also not be covered by reg 7.1.29 because it is not reasonably necessary for Mary to give this recommendation in order to give Peter advice about the establishment of a SMSF (and the recommendation would not be an integral part of such advice). Mary could, however, recommend to Peter that he should not establish a SMSF and could refer him to Paul or another AFS licensee to get advice about the alternative options available to him.

Again, to the extent that Mary provides a service in the course of providing taxation advice and it was reasonably necessary for Mary to provide the service in order to give the taxation advice, this activity will also be covered by the exemption in regulation 7.1.29(4) provided that Mary:

does not receive a benefit (other than from Peter or Peter's associate) as a result of Peter acquiring a financial product (or class of product) mentioned in the advice;
gives Peter a written statement that:
- she is not licensed to provide financial product advice;
- taxation is only one of the matters that must be considered when making a decision on a financial product; and
- Peter should consider taking advice from the holder of an AFS licence before making a decision on a financial product.

If Peter decides not to acquire an interest in a SMSF, and Mary complies with the provisions set out above, the exemption for taxation advice will still apply.

Paul
Paul will need to have an AFS licence with authorisations covering financial product advice in respect of superannuation products and the underlying investments. Paul will need to comply with the training standards in Policy Statement 146 Licensing: Training of financial product advisers [PS 146].

What if Peter does not consult Paul?
Peter may decide that he does not wish to see Paul about retirement planning. He may make his own decision to establish a SMSF. If Peter has decided himself to establish a SMSF he can still ask Mary to set up the SMSF and provide accounting and taxation advice in relation to the establishment and operation of the SMSF. Mary does not need an AFS licence to provide these services if she makes no recommendations about what investment strategies the SMSF should adopt.

Even if Peter has not made his own decision to establish a SMSF, as Mary is a recognised accountant for the purposes of reg 7.1.29A, she can give Peter a recommendation to set up a SMSF provided that she gives him the required written warning. However, this recommendation may not include a recommendation that Peter dispose of another superannuation product in order to set up the SMSF (ie. rollover another superannuation interest into the SMSF) or change contribution levels in relation to another superannuation fund unless she holds an appropriate AFS licence authorisation.

Published 8/10/2003
Revised 26/3/2004
Updated 22/12/2004

These FAQs provide general information about how we are implementing the Financial Services Reform legislation. We are unable to provide legal advice or interpretations of the legislation. These FAQs should not be treated as legal advice, nor as statements of our policy.

We are not able to comment or provide guidance on specific commercial situations. We recommend that you get your own professional advice before making any decisions about your particular situation.

More answers to your questions about financial services regulation
Financial services homepage

ASIC Website: Printed 02/10/2010

Number:	-- OR --
Name: