An Insight on Rising Cost of Running an Accounting Profession
When a humongous number of accounting firms are already leading in the market, the prospects of the newbies merging in the market is a little difficult. Some of the primary concerns that are being looked and sought after are increased registration charges, compliance, and operational costs, running expenses as compared to the older firms, and so on.
According to the 76 recommendations mentioned in the Final Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, none was targeted at the accounting and the related profession. However, there were mentions of direct consequences for multidisciplinary accounting firms, particularly those of financial advisory services.
According to the CPA’s General Manager, External Affairs, Paul Drum FCPA, the imposition cost on the accounting practices are consistently rising. This was a result of the move by the Australian Securities and Investments Commission (ASIC) while transitioning to a full-funding model with a substantial increase in registration costs.
What are the Extra Charges?
The accounting firms who are practising with limited Australian Financial Services License (AFSL) have to pay A$1500 to AFSL for their license continuity. Additionally, the businesses need to pay a graduated levy of A$934 for every person under the same license. The agents performing tax and BAS lodgements have to pay higher registration charges.
The Registration Fee of ASIC for Self-Managed Super Fund (SMSF) auditors have been enhanced from A$107 to A$1927. Additionally, ASIC will impose an additional charge of A$899 to cancel an SMSF auditor registration.
Drum also states, “So, they get you hooked onto paying an annual feel to be the one, and then you have got to pay an exit fee to stop one. It is very unusual, to say the least.”
He continued, “The registrations are a privilege in that they enable someone to undertake certain work that others can’t. We get that. But we’re not sure that the registration costs bear any resemblance to the cost of providing that service.”
Other Hidden Charges!
In addition to the registration charges, there are higher compliance costs for firms offering financial advice. This compliance cost includes high training costs associated with Financial Adviser Standards and Ethics Authority (FASEA) control and current expenses while bridging course requirements with continuing professional development (CPD) costing tens of thousands of dollars per year.
A high price on advice
The CPA Australia’s Manager, Keddie Waller also opines that the move of ASIC to a full funding model is coupled with the regulatory charges and other potential changes from the Royal Commission. This adds to the complexity of costs and out of the reach of some segments of people.
According to Waller, “I think the thing that the government and Treasury forget in looking at a lot of these regulations and new requirements [is], they often fail to connect the dots that they’re hitting the same person a lot of the time.”
“If you’re a professional accountant and you’re providing some personal advice to your clients, even if it’s limited in super, plus you’re a tax agent, there’s three different layers of legislation and three different costs there.”
Where the actual cost rose?
- ASIC has enhanced license registration fees and levies specifically for tax and BAS agents, auditors, and financial advisers.
- Insurers have, in some cases, almost doubled their charges of professional indemnity insurance premiums.
- FASEA training prerequisites will force the practitioners to either pay for full degrees or individual units.
What is the result?
- Some multidisciplinary practices have to streamline accounting services.
- Most of the sole practitioners, including advisers, may get side-lined from the business.
- Higher costs will be quoted for clients, especially as the financial advice services increases in correspondence to our aging population.