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Reforms around the type of advice tax agents can provide could help mitigate the issue of members illegally accessing their super, the association says.
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CA ANZ pushes for advice law changes to address illegal super access
28 February 2024
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10 minute read
Allowing unlicensed accountants to provide simple advice on SMSFs and super through reforms to the law could help stem the amount of money being illegally accessed from super funds, according to CA ANZ superannuation and financial services leader Tony Negline.
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The ATO revealed earlier this month that $380 million and $255 million had been illegally access from SMSFs in 2020 and 2021, respectively.
In a recent opinion piece, Mr Negline said that one of the issues exacerbating the issue is the fact that registered tax agents who are not licensed under an AFSL are restricted from being able to offer assistance to their clients when setting up SMSFs.
“We know from ATO data that many SMSFs are set up with the assistance of a Registered Tax Agent (RTA). Many of those RTAs do not have an Australian Financial Services License and will often conclude that they cannot assist vulnerable clients because they do not want to fall foul of the Corporations Act and face penalties,” explained Mr Negline.
“It’s no surprise to say that people often do not automatically fess up to intending to break the rules. This means more questions need to be asked to find out what is going on but the unlicensed RTA will find it difficult to ask them, without being deemed to provide financial advice.”
Mr Negline said CA ANZ’s preferred solution is that the law should be amended to allow unlicensed accountants to provide simple advice to their clients about the risks and dangers of setting up an SMSF and allowing them to suggest that it may not be in the client's best interests, as is required under the accounting code of ethics – APES 110.
Until the law is amended, Mr Negline said the accounting body is encouraging ASIC to release guidance to unlicensed RTAs on what can be said without accidentally breaching the Corporations Act.
“The majority of tax agents without an Australian Financial Services License need guidance and assistance from the Australian Security and Investments Commission (ASIC) on how they can help their clients set up an SMSF and understand the risks of illegally withdrawing money from superannuation via a SMSF,” he said.
“The category of SMSFs that loan money to the members of their fund, their relatives or a related business or trust are a separate category. Again, tax agents without an AFSL need further guidance from ASIC and further trustee education is crucial.
“In all these areas it is essential that the ATO, ASIC, Tax Practitioners Board (TPB), professional associations and the sector at large work together to find a workable long-lasting solution.”
Mr Negline noted that often people gain access to their super after speaking to a person or organisation that helps them achieve this.
“Typically, these “advisers” do not have a financial services license. They fail to explain the dangers of illegally accessing retirement money including the potential for the ATO to ban the person from being a SMSF trustee, which causes problems for the individual in other areas of their life and significant potential tax penalties,” he said.
“We encourage the ATO to continue its excellent work on seeking to stop those falling into the trap of illegal early release, especially by unscrupulous operators and fraudsters. More resources should be put into this already successful initiative.”
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