However, looking at the potential strategic benefits for accountants, forced registration could be a blessing in disguise. Chartered Accountants Australia and New Zealand's head of superannuation, Liz Westover, recently commented in regards to SMSF auditor registration saying, “It was a great opportunity for people to really think about the services that they were offering and whether or not they wanted to continue to offer SMSF audit services."

Looking at the impact of SMSF auditor registration, the number of accountants undertaking SMSF audits dropped from between 10,500 and 11,000 down to 7,000, a 36 per cent reduction. Some of the benefits to the SMSF industry that have been identified include:

- Better data-matching by the ATO providing better regulatory oversight*
- More accurate targeting of communications and educational initiatives
- A significant reduction in independence issues
- An overall increase in the average level of knowledge and competency of participants

*It could be argued that this is not actually a benefit to SMSF auditors directly, but a strong SMSF industry that stands up to scrutiny is in the best interest of every participant.

Impact of registration on the accounting industry

It is widely accepted that the SMSF space is highly fragmented and is only starting to mature from a cottage industry to a recognised specialist field within financial services. ATO statistics back this up. Based on SMSF annual return lodgements from 2013, just over 13,000 tax agents lodged SMSF annual returns. Of those 13,000 tax agents, a sizable 8,491, or 65 per cent, lodged 20 or less SMSFs for the 2013 year.

When the SMSF auditor registration requirements were put in place, the grandfathering provisions enabled accountants who had signed off on 20 or more SMSF audits to become registered without the need to sit a competency exam.

If a similar approach was taken with accountants, enforcing a minimum of 20 SMSFs would send a massive shockwave through the accounting industry. It would knock close to two thirds of tax agents out immediately, based on low SMSF lodgement numbers alone.

Those accountants would also be at risk of potentially losing their business relationship with some of their clients if they were unable to complete the SMSF work together with other business accounting work. Combined with the 1 July 2016 removal of the accountant’s exemption, many accountants would be forced to look at alternatives to change or to ‘beef up’ their SMSF client base to stay active in the space. This could include:

- Acquisition or merging with another firm to gain scale
- Aggressively pricing and picking up more loss-leading SMSF business to bolster numbers
- Recommending more existing clients establish SMSFs, potentially inappropriately, to boost numbers prior to the change
- Consolidate their existing SMSF client base with a number of ‘partners’ and create a joint venture SMSF specialist business

Alternatively, accountants may choose to outsource to a larger SMSF provider that can provide the scale, efficiency and services to them while they maintain the primary relationship with the client.

We’ve already started to see the early signs of consolidation in the SMSF space and this is predicted to continue. The removal of the accountants' exemption and the decision whether to license or not has already started to force the hand of many accountants in regards to their continued participation in the space.

Impact of registration within accounting practices

Although forced changes to business practices often create angst, it’s not unusual for them to be beneficial in the long term. The registration of accountants, to be able to lodge SMSF returns, would force all firms to strategically look at whether they should continue to offer SMSF compliance services to their clients.

I’ve personally been involved in providing SMSF compliance services to both trustees and advisers for well over a decade. Many multi-disciplined accounting firms have a passion for SMSF, deliver great service, and make it a key point of difference in their offering. They are doing it right.

Unfortunately, many more firms, regardless of size, are doing SMSFs wrong. They don’t have the right systems or software, they lack the specialist knowledge and, most importantly, they lack staff who are passionate about SMSFs.

Although I personally don’t deal directly with trustees anymore, I often see the result of non-specialist accountants dabbling in SMSFs via the advisers we work with. It’s not hard to identify shortcomings in their work: inaccuracies, mistakes, late lodgements, incomplete or non-existing paperwork, poor or non-existent advice, and a general lack of passion for the SMSF work they perform.

I’m not alone in this train of thought. American CPA and accounting business guru Jason Blumer identifies three key things that are holding accounting firms back:

- The services they offer – firms should only perform services they can offer in a powerful way
- The clients they service – firms need to prune clients that don’t suit their service offering to free up capacity to take on clients that are aligned with them and are more profitable. 
- The team members they have – firms need to have the right people on the bus and get rid of the dead weight and mediocre performers (acknowledged as the hardest one to address).

Those three key factors (services, clients, team), are critically important for accounting practitioners when determining whether they should continue to offer SMSF compliance services – regardless of whether a mandatory registration process was put in place or not for tax agents.

Summary

With the introduction of sophisticated, cloud-based SMSF platforms in recent years, the disparity between generalist accounting firms that perform some SMSF work and specialist businesses that live, eat and breathe SMSFs has widened.

Although many will likely disagree with me, I believe there should be additional mandatory registration of all tax agents who wish to perform SMSF services. The benefits would greatly outweigh the short-term and ongoing costs. It would also make the SMSF industry even more robust and efficient, while acting as a shield from anti-SMSF lobbyists who invest millions in trying to undermine the strongest sector of the superannuation industry.

Kris Kitto, director, Superfund Wholesale