ASIC has amended ASIC Corporations (Recognised Accountants: Exempt Services) Instrument 2016/1151 (the instrument) to address a clear regulatory anomaly. The amendments enable full Australian financial services (AFS) licensees (and authorised representatives of full AFS licensees) with limited authorisations to provide exempt tax advice under regulation 7.1.29(4) of the Corporations Regulations 2001 in relation to financial products not covered by their AFS licence.
These amendments mean that full AFS licensees are not disadvantaged in relation to advice on taxation issues compared to limited licensees (i.e. those who are licensed to provide a limited range of financial services relevant to SMSFs) or those without any AFS licence.
We have also updated Information Sheet 216 AFS licensing requirements for accountants who provide SMSF services (INFO 216) to reflect the amended instrument.
Background
Regulation 7.1.29(4) enables a person to provide advice on taxation issues, including advice in relation to the tax implications of financial products, without an AFS licence. If the tax advice is also financial product advice to a retail client, this exemption is only available if accompanied by a written warning which states, among other things, that the person providing the advice is not licensed to provide financial product advice: regulation 7.1.29(4)(c)(ii).
Limited licensees could not comply with the requirement to provide a written warning that they are not licensed. Therefore, they could not rely on the exemption to provide advice to retail clients on the tax implications of financial products which are not covered by an authorisation in their licence, nor could they provide the advice under their limited licence where their licence did not cover the financial product which is the subject of the advice.
The instrument addressed this regulatory anomaly by enabling limited licensees and their authorised representatives to provide a modified warning in order to provide exempt advice on the tax implications of financial products that are not covered by their authorisations.
Since the instrument was made, we have identified that full AFS licensees (and authorised representatives of full AFS licensees) with limited financial product authorisations also encounter the problem described above.
The amendments enable full AFS licensees (and their authorised representatives) to provide a modified warning under sub-paragraph 7.1.29(4)(c)(ii) which states that:
- the person providing the exempt advice does not have the authorisation to provide this advice;
- taxation is only one of the matters that must be considered when making a decision about a financial product; and
- the client should consider taking advice from an AFS licensee with the appropriate authorisation before making a decision on the financial product.
These amendments put full AFS licensees (and authorised representatives of full AFS licensees) with limited authorisations on the same footing as limited licensees (and authorised representatives of limited licensees) with regard to being able to provide exempt advice under regulation 7.1.29(4).
For more information about the limited licence regime, see our webpage Limited financial services.