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accounting exemption

LRBA Loans Dying a Quick Death (Part 2 of 3)

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James Barger-Bos, CEO of Finance Wise Global Securities Pty Ltd,  has over 27 years of financial services experience. Fwgs is offering accountants a simple clear and cost-effective solution to the accounting exemption. By becoming authorised representatives accountants will have an intuitive web based software solution, a complete range of training options (including an RG146 face to face course) and for the first fifty accountants a share of the net profit.

What does APRA have to do with the changing landscape of SMSF lending? Everything.

The lending limits imposed by APRA have caused banks to increase their margins on investments loans, or interest only loans, and in some cases on both. This means a home owner, at some banks, who has elected to pay a portion of their debt interest only is paying a higher rate. Why?

Simply, those loans are not being repaid and thus it reduces the bank’s capacity to lend to new clients.

This policy decision has caused some lenders to exit the LRBA space. This is in spite a continuing desire by lenders to capture this market which earns better margins than traditional home loans and enjoys extremely low default rates.  However, they are being forced not to lend.

In addition, some lenders have scrapped plans to enter the space and this may exacerbate another issue. The lenders who remain are going to arrive at their APRA lending targets quicker than anticipated and will then have to hang up the closed for business sign. This damages their brand as the mortgage broking community takes a dim view of lenders who exit, and the rest of their product offerings may be hurt as a consequence.

Brokers will forget why this occurred.  They will just remember that it did and the one application they tried to present could not proceed.

But it gets worse. If the transaction does proceed and is pre-approved but the client is purchasing off-plan or simply needs time to conduct their research and identify the most suitable property and THEN the bank pulls the plug, the client may find themselves being left completely in the lurch.

Rightly, they and their advisors believe funding is in place but with a single computer key stroke that ceases to be the case.

If you would like to discuss how the constantly changing banking environment would affect your capacity to provide advice once the exemption expires then please feel free to ask us by emailing [email protected]

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accounting exemption

LRBA Loans Dying a Quick Death (Part 1 of 3)

James Barger-bos Leave a comment

James Barger-Bos, the CEO of Finance Wise Global Securities Pty Ltd, has over 27 years of financial services experience. Fwgs is offering accountants a simple, clear and cost-effective solution to the accounting exemption. By becoming authorised representatives they will have an intuitive web based software solution, a complete range of training options (including face-to-face RG146 face to face course) and for the first fifty accountants a share of the net profit.

In his first article he deals with RG205.

James has advised on numerous transactions but has not been involved in providing Credit Advice since the APRA changes. These changes are having a profound impact on the lending landscape. As an aside he established his own SMSF several years ago for the purpose of buying an office.

When we chat to the average suburban accountant seeking advice on the exemption expiry and licensing solutions, we ask them what their typical SMSF client looks like. Many accountants respond that the typical clients are Gen Xers seeking to buy residential property.

After the exemption expires on July 1st 2016 many expect this to continue.

A case fwgs recently provided advice on represented a typical scenario; a single professional is rolling her fund of $135,000 into an SMSF and purchasing a residential property. Allowing for $5,000.00 in set up costs we have the following borrowing requirements.

Purchase Price:                 $340,000

Purchase Costs                  $18,000

Total                                    $358,000

Loan 70%                           $238,000

Deposit                               $120,000

Surplus                               $10,000

Even if there are no surprises ie significant repair of air conditioners, ovens, faulty electricals or plumbing and there is a tenant immediately available would this scenario be acceptable? As a hint, James isn’t sure how insurance could be paid for either.

However, once the exemption expires this scenario will not be acceptable to licensees. RG205 is very clear on advisors recommending that funds be established when the rollover balance is under $200,000. It needs to be justified.

On what basis could this scenario be justified? If the Gen Xer was self-employed and intended to make a concessional contribution of $30,000 within the next month and then another on July most licensees would accept this. Most. The wording needs to be clear in the recommendation section of the Statement of Advice.

If you would like to discuss how the constantly changing banking environment would affect your capacity to provide advice once the exemption expires then please feel free to ask us by emailing [email protected]

If you found this article interesting, why not

  • SEND it to a friend from the sidebar
  • LEAVE A COMMENT by clicking on the icon at the top of the article
  • Send FEEDBACK directly to us at [email protected]
SMSF Accountants Exemption

ASIC warns of ‘significant risk’ with licensing (RG146)

James Barger-bos Leave a comment

As the time moves inexorably to the accounting exemption deadline finance wise is expecting to be rather busy in early 2016. James Barger-Bos, the CEO of finance wise global securities, remains optimistic but does have some concerns. Finance wise offer a unique web based software solution for accountants to enable them to manage the new advice environment with little impact on their current businesses.

“We have developed a two day face to face RG146 course for accountants and we bring the training to a suburb where there are a cluster of firms interested. Every firm should be interested but the common complaint is that they don’t have enough time to manage their own practice let alone take on additional training and manage the ASIC responsibilities.”

This is reflected in the following article sourced from SMSF Adviser (September 17th) written by Katarina Taurian.

At the end of August, ASIC had received only 161 applications for the limited licence.

“This number is very low if you consider the number of accountants who are likely to rely on the exemption,” said ASIC senior manager Trevor Clarke at the Chartered Accountants Australia and New Zealand National SMSF Conference on the Gold Coast earlier this week.

Of that 161, 70 have been approved, seven are currently under assessment and 82 have been withdrawn by the applicant because they had supplied insufficient information.

One applicant converted from a limited to a full licence, and “interestingly”, one application had an offer withdrawn after information surfaced that was not originally disclosed to ASIC, Mr Clarke said.

Some of the common issues that ASIC has seen in applications include insufficient evidence of training course completion, failure to include critical mandatory financial information, and failure to provide evidence of adequate professional indemnity insurance, Mr Clarke said.

“If issues can be rectified easily, we will give the applicant the chance to do so. However, if it can’t, we will give the applicant the option of withdrawing the application so they can attend to the issue,” he said.

Mr Clarke also expressed concern about those accountants who have yet to lodge their limited licence applications.

“Those who delay lodging their application until soon before June 2016 may very well find themselves unable to advise on SMSFs for a period of time until we finalise the assessment of the application,” Mr Clarke said.

“If we receive an influx of applications, depending on the numbers, processing the applications may take several months.

“We encouraged accountants applying to do so by 1 March 2016. This date is not mandatory, but if you lodge it past this date, you are facing significant risk that the application will not be assessed before 30 June [2016],” he said.

To register for the accountants RG146 course and enquire about licensing send an email to [email protected] or register online.

If you found this article interesting, why not

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