“Through these determinations, AFCA has as a result had a law-making effect due to the precedential nature of the decisions, and the lack of guidance or instruments issued by ASIC or case law,” the submission stated.

“The reasons for these decisions are contrary to industry’s understanding of the application of these provisions in the context of SMSFs. As a result, wholesale advisers and product issuers, together with impacted SMSF trustees, are uncertain as to how the tests are to apply to SMSFs.”

The association said there are concerns about the impact this will have for investments and investors and where SMSFs who have been classed as wholesale will go for advice if they are suddenly classed as retail clients.

“This will have implications for other investors if SMSFs are required to exit or divest certain investments. It may also impact the commercial viability of certain investments or projects,” it continued.

“While the SMSF Association has expressed concerns surrounding the suitability of $2.5 million net asset test in a contemporary context, this is an issue that needs to be addressed quite separately from the issues arising for SMSFs outlined here.”

The submission stated that legislative certainty is urgently needed to ensure that firstly the application of the $2.5 million net asset test applies to SMSFs where the trustees satisfy the test requirements.

Furthermore, it stated there needs to also be certainty around the $10 million test that applies to APRA regulated funds with more than six members as well as advice on the investments held in an SMSF, and assurance that the placement, issue, acquisition or disposal of fund investments does not constitute a dealing in a superannuation product.

“The definition of a superannuation product needs to be clearly defined, ensuring it applies to the acquisition or disposal by a member of an interest in a superannuation fund, a pension, lump sum and estate planning,” it added.

“The operation of the superannuation sourced funds needs to be clarified to ensure that the legislation achieves the original policy intent and does not act to limit an SMSF’s investment in financial products.”

The submission urged the government to look for a remedy for these “long-standing issues” that are now coming to a head due to the AFCA determinations.

“Despite numerous reviews and inquiries over the last 14 years, there have been no outcomes in this area of law,” it stated.