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Diversification probe highlights sticking point for accountants


The ATO’s move to examine trustees with low levels of diversification in their portfolio has highlighted the quandary faced by accountants under the limited licensing regime, according to a leading SMSF administrator.

By Sarah Kendell3 minute read

Heffron managing director Meg Heffron told sister title SMSF Adviser that the Tax Office’s current diversification review had brought to light a key problem with the limited licensing regime, being that SMSF trustees were unfairly siloed from receiving simple advice on their fund from their accountants when they may not be willing to pay for full personal advice.


“I am a strong advocate for advice because I wouldn’t want my retirement savings invested on a whim by me, but at the same time, we are all adults and if I don’t want an adviser to look after my own money for my retirement, why should I have to have one?” Ms Heffron said.

“Under the current system, it’s hard to get narrowly focused advice, like ‘just tell me what to do about this strategic issue within my SMSF’. The best place for [clients] to start is accountants because they are used to handling all the tax rules, so it seems odd that we’ve singled SMSFs out and said you can’t give structural advice around an SMSF.”

With a recent Treasury review of the Tax Practitioners Board floating the possibility of reintroducing the accountants’ exemption, Ms Heffron said it was clear regulators had not yet got the balance right when it came to the SMSF advice ecosystem.

“I think accountants are still struggling with the fact they legally have to be licensed for something they have done without a licence for many years,” she said.

“They misunderstood or didn’t want to hear that the accountants’ exemption was really narrow so drifted outside that frequently, and limited licensing brought the issue to a head and made it hard to pretend you didn’t know you needed to be licensed to give all sorts of advice.

“But at this stage nothing’s worked — no licensing didn’t work, the exemption didn’t work, limited licensing didn’t work, full licensing would be stupid, so I don’t know what the solution is.”

However, Ms Heffron added that the ATO’s moves to investigate undiversified funds was unlikely to seriously affect trustees who had a proper understanding of their regulatory obligations, whether or not they were advised.

“The ATO has a lot of data and they must be surprised that 3 per cent of SMSFs have so much money in one asset class and wonder if they’ve thought about it,” she said.

“Within that group, there is going to be a subset that have been mis-sold something, and if the way you help those people understand they’ve been mis-sold is they get a letter asking if they’ve considered diversification, it’s not that harmful.

“Where it would be different is if the ATO starts imposing penalties on people because their reasons aren’t good enough, if it starts to cross the line between a helping hand and imposing their worldview on investors who don’t have to subscribe to that view that diversification is a must-have.”

Diversification probe highlights sticking point for accountants
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