Sometimes I count myself lucky that as an auditor I am not at the forefront of providing advice to SMSF trustees. In fact, I am not licenced to give financial product advice and it is not an area in which I wish to practice. I am therefore fortunate that I don't have to immediately be across the biggest changes our industry has seen since 2007 and can actually sit back somewhat and observe how the industry reacts.
I speak to accountants and financial planners from firms both big and small across all parts of Australia on a daily basis and since the new legislation has been passed I have attended an SMSF Discussion Group, viewed a webinar and participated in face to face training. With all of this I have seen and heard a lot in the two weeks since the legislation passed and thought it would be interesting to share my observations.
The superannuation announcements in the May Federal Budget definitely received the attention of accountants. There were a flurry of articles and seminars that many of them attended but there was definitely a feeling of let's wait for the legislation before investing too much time in understanding how the changes would work and how they would be applied to clients. Even when we received draft legislation it was still a case of let's wait and see. However, the passing of the legislation on November 29 has meant that many accountants are realising that the time for action is now. There has been a definite shift from let's wait and see to we must do something to understand the minutiae of the legislation.
However, whilst there is a general understanding that there is work to be done, I have seen a broad spectrum of approaches from those who have printed the legislation and draft Law Companion Guides and read them cover to cover, to those who may have the chance to think about it over the Christmas break. Those that are well informed about the changes know that despite being told that only 4% of the superannuants will be affected, when it comes to their SMSF members, a much larger percentage will be affected and it is not just those members already above the $1.6 million cap. It is also those individuals who are well on their way towards $1.6 million who will now need to change contributions strategies and revisit estate planning.
They therefore understand the amount of work ahead of them over the next 7 months as they need to revisit the planning for each and every SMSF and consider contributions strategies, pension strategies, look at contribution splitting, maximise non concessional contributions and understand the new 3 year averaging transitional rules, make decisions on existing and future TRISs, contemplate planning around the transitional CGT relief, look at the valuation of assets and revisit their clients' estate planning. They also need to come to grips with new terms such as Personal Transfer Balance Accounts and Excess Transfer Balance Determinations.
All this at a time when accountants are grappling with the removal of the accountants exemption from 1 July 2016 and many of them are now preparing their first statements of advice. Add to this, the fact that accountants are also extremely busy trying to finalise work before Christmas, only to return to a mountain of work to tackle after their break and you have a challenging time.
For what it is worth, here is my assessment of what needs to occur:
- You can't put your head in the sand. Doing nothing is not an option.
- You will have to invest in education for you and your staff.
- You will have to systematically work your way through your client base and re-assess the strategies for each SMSF in light of the new landscape to determine what needs to occur by 30 June 2017 and what can wait until after that date.
- You can't forget the clients who have one or more APRA regulated funds instead of an SMSF.
- You must be licenced to be able to give the necessary advice to your SMSF trustees or have a referral arrangement with someone that is.
- You need to be careful about the anti-avoidance provisions in respect to the transitional CGT relief.
- With my auditor's hat on, you need to be preparing your clients for the fact they will need to accurately revalue their properties, units in unlisted unit trusts and shares in unlisted companies as at 30 June 2017 so informed assessments can be made on that date.
It may be challenging but it's also exciting as the superannuation changes give you a fantastic opportunity to engage with your clients and provide them with great advice and add some real value. Despite my comment above that we don't have to immediately react to the changes in superannuation, please however be assured we are working our way through the changes and are here to support you in whatever way possible. You are certainly not alone - let us know if we can help.
David's wealth of business experience and a clear vision for the future has enabled Baumgartner Super to establish itself as a market leader.