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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.”

Finance wise has a clear simple and cost effective solution for accountants wishing to do what they have always done with a minimum of fuss and a unique piece of software that automates the process from $50 per month. Just contact for more information.

ASIC Shadow Shopping has commenced

While most of us think of bags full of sales items when the word shopping is mentioned, accountants might need to think of ASIC.   Finance wise has stated since September that ASIC were implementing a mystery shopper program directly targeting accountants.

According to the front page of the SMSFAdviser Magazine (Jan 2016) the mystery shopping has begun ‘to ensure accountants are complying with their new licensing obligations.’

Shadow shopping is well known to financial advisers and in the view of finance wise principal, James Barger-Bos, this is just the beginning of the new world order for accountants. The major concern for ASIC is accountants claiming they will only act on instructions from July 1st when the exemption expires.

All financial advisers know this is impossible but more worrying for the accounting profession so does ASIC.

James’ view is shared by many. According to the Institute of Public Accountants (IPA), this activity is set to increase in 2016. Vicki Stylianou from the IPA has indicated that ASIC considers the accountants’ exemption phase-out as non-negotiable. She urged accountants at the IPA National Congress on the Gold Coast to ensure they addressed the issue as it was not going to disappear. She noted that “it is a completely new world and things will be changing from 30 June’. In terms of resourcing and support, she also noted that ‘not all licensees are equal’ and that it was wise to ensure comparisons were made in relation to services offered. Price should not be the sole concern. It is worth noting ASIC advise below;

“Accountants who do not lodge applications which meet ASIC’s requirements by 1 March 2016 run a significant risk that their application will not be assessed before 30 June 2016.”

It is reasonable to ask why an accountant would manufacture a client experience to avoid their obligations? The primary reasons are costs, fear and education rather than deception. It is dawning on accounting practices that a Statement of Advice is a lengthy document and it will take somewhere between 10 and 20 additional hours to comply after the accounting exemption. Many are also unaware that software is available to automate the process.

Finance wise offers simple, clear and cost effective RG146 training, software that automates the SMSF advice process, and a licensing solution that includes banking deposit advice, contributions advice and pension advice. Finance wise is the premier licensee option for accountants.

The question you need to ask is are you ready for shadow shopping customers? If the answer is “NO”, you can email and finance wise will assist you with any queries regarding the accounting exemption, RG146 training, licensing solutions and software.


LRBAs a ticking time bomb

LRBAs – a ticking time bomb for accountants

Banks who regularly hand out money without any documentation are known as charities.

So when the trustee of an SMSF borrows money from a bank they expect documentation, and a lot of it. Trustees also expect valuations, credit criteria, an application fee and an interest rate that reflects market conditions.

The ATO obviously know this and are therefore placing a heavy emphasis on appropriate documentation, security, fees and charges to confirm the validity of such borrowing arrangements.  The ATO has stated that it is “very concerned” that SMSF trustees are not meeting or aware of certain conditions that would qualify their related-party loan as being on commercial terms. This should make Accountants working in this space take notice.

Auditors have been communicating the necessity of arms-length arrangements and appropriate interest rates for some time but the ATO is seeking more. Aside from operating an AFSL which accommodates Accountants seeking the best authority solution after the accounting exemption expires, finance wise also operates a credit license and has many years of SMSF borrowing experience.

To the best of our knowledge there is no such thing as an unsecured loan to SMSF’s and no lender hands out money without documentation.

It is critical to document the terms of all loan arrangements and to register a mortgage or a caveat.

The ATO has given the industry time and opportunity to resolve these matters. So all practitioners should be looking at their related-party LRBA loans and ensuring the ATO requirements are followed to the letter.

If you have any queries regarding the accounting exemption, RG146 training, licensing solutions and software please email and finance wise will assist.