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If you carry on a business of providing
financial services then, unless an exemption applies, you must
hold an AFS licence or act as the representative of an AFS
licensee.
Financial product
advice is a kind of financial service. Tax advice may be
financial product advice. You will only need a licence if the
tax advice you give is financial product advice and you are
not otherwise exempt from the requirement to be licensed. The
definition of 'financial product advice' is discussed below.
If you provide opinions about the tax implications of
decisions about financial products, you are likely to be
providing financial product advice, which is generally a
financial service under the Corporations Act 2001
(the Act). In certain circumstances, providing advice about
the tax implications of financial products may be an 'exempt
service' (i.e. not a financial service under the Act): see reg
7.1.29.
Am I giving
financial product advice?
Financial product advice means a recommendation or
statement of opinion, or a report of either of those things,
that:
- is intended to influence a person or
persons in making a decision in relation to:
- a particular financial product or
class of financial products; or
- an interest in a particular financial
product or class of financial products; or
- could reasonably be regarded as being
intended to have such an influence.
For more information see s766B(1) and our guide
The scope of the licensing regime: Financial
product advice and dealing.
An opinion can
be financial product advice if the opinion is provided to
assist a decision about a financial product, even if it does
not refer to (or is not about) a financial product or class of
financial product. An opinion about tax may be financial
product advice even if the sole or primary consideration in
the client's decision making is not tax. If tax advice is
intended to influence the client in decision-making about
financial products, the tax advice may still be financial
product advice.
Tax
agents
Advice given by a tax
agent registered under Part VIIA of the Income Tax Assessment Act 1936 is not financial product advice if the advice is:
- given in the ordinary course of
activities as such an agent; and
- reasonably regarded as a necessary part
of those activities: see s766B(5)(c) of the
Act.
Lawyers
Advice given
by a lawyer in his or her professional capacity about matters
of law, legal interpretation or the application of law to the
facts is not financial product advice: see
s766B(5)(a).
Allocation of
funds available for investment
A person is also taken not to provide financial
product advice if they:
- only express an opinion or
recommendation about the allocation of a person's funds
among certain types of products (see reg 7.1.33A); and
- do not express an opinion or
recommendation about a specific financial product or class
of financial products.
Exempt services
Regulation 7.1.29 provides that certain services
are not a financial service if:
- the person provides the service in the
course of providing an 'exempt service';
- it is reasonably necessary to provide
the service to conduct the exempt service; and
- the service is provided as an integral
part of the exempt service.
Exempt services are listed in regs 7.1.29(3)–(5).
Advice on tax issues is an exempt service under reg 7.1.29(4)
if:
- the person will not receive a benefit
(other than from a person they are advising or their
associate) as a result of the person they are advising
acquiring a financial product mentioned in the advice (or a
financial product that falls within a class of financial
products mentioned in the advice); or
- the advice does not constitute
financial product advice to a retail client; or
- if it does, the advice is accompanied
by a written statement that:
- the person providing the advice is
not licensed to provide financial product advice under the
Act;
- tax advice is only one of the matters
that must be considered when making a decision to acquire
a financial product; and
- the client should consider taking
advice from a licensed person before making their
decision.
The
terms of the required statement mean that tax advice will only
be an exempt service if the person providing the advice is not
an AFS licensee authorised to provide financial product advice
or a representative of an AFS licensee that has
authorisation.
Licensing exemptions
A
person does not have to have an AFS licence to provide a
financial service if an exemption from licensing applies: see
s911A(2) and reg 7.6.01.
For
example, provision of a service is exempt from licensing if it
consists only of informing a person that an AFS licensee or a
representative of an AFS licensee can provide a particular
financial service or class of financial services. This
exemption is conditional on certain disclosures being made:
see regs 7.6.01(e) and (ea).
What should I do now?
If you are a tax adviser, you will need to consider
whether you provide any financial services that may require
you to hold an AFS licence or become a representative of a
licensee. You may also need to seek legal advice about any
uncertainties in your particular
situation.
More
information
If you are an
accountant who provides tax advice, see QFS 10 Do
the AFS licensing requirements apply to
accountants?
If you are a
financial planner who provides tax advice, see QFS 153 I
am a financial planner. What particular requirements apply to
me under the Corporations Act when I give advice about the tax
implications of financial products?
Published 15/12/2004
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