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accounting exemption

Illegal early access tipped to surge

Finance wise has completed many RG146 training courses where the emphasis is on the tasks that accountants (and auditors) need to do when licensed or authorised after the accounting exemption expires.  It is obvious that the technical knowledge is excellent but without an automated solution it is inevitable that accountants will often fall short of ASIC’s requirements.

There was an article located in the SMSFAdviser magazine on Friday, 22 January 2016 written by Miranda Brownlee which cautions SMSF professionals to be “on guard” for increased incidents of illegal early access among trustees, since recent market volatility may see a repeat of the types of behaviour seen during the GFC.

The managing principal of Argyle Lawyers and SMSF Adviser Peter Bobbin, indicated that the GFC caused many people to suffer personal lifestyle cash flow problems, with some trustees unable to resist illegally accessing their SMSF cash, particularly given the ease of accessibility.

“What the GFC did for some people is it created disaster – financial disaster – and in panic, people just used cash [from their SMSF],” said Mr Bobbin.

He warned that with the recent stock market routing, this may occur again.

“One of the things that the GFC has taught us to now expect, although one hopes it is on a much smaller scale, is that we may have clients who are illegally accessing their super, so professionals need to be on guard for that.”

A prime example of where this can happen is where an SMSF trustee has a negatively geared portfolio and there are calls on the gearing part of their investment.   The trustee then scrambles for cash.

“In my professional services, I’ve certainly come across people, SMSFs, that have borrowed to acquire, and the underlying asset has gone south in value,” said Mr Bobbin.

“We may [also] get a variety of businesses that have, and possibly may continue to fail, as part of the stock market routing, as just a natural follow-on.”

Mr Bobbin also predicts that the routing of the stock market will see poor returns for either the 31 December 2015 statements or 30 June 2016 financial statements of APRA-regulated funds, which will subsequently see a spike in the number of SMSFs.  He indicated that it is lucky for the APRA-regulated funds that the stock market routing did not happen prior to 1 January 2016. He noted that;

“The Australian stock market has dropped seven per cent, and international markets have also taken a dive. That can wipe out the whole of any return for the whole six-month period.”

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