Treasury mulls big changes for modernising SMSF documents

Mr Dunn noted that Treasury released a modernising business communications paper in December 2020, which looked at a broad spectrum of areas.

One of the things the government is looking to do is bring the Treasury portfolio laws into the technology neutrality framework, which could have benefits for SMSF documents, he explained.

In February, a bill that addresses issues with electronic execution and signatures with the Corporations Act was passed and received assent.

“This opens up the Corporations Act to the Electronic Transactions Act and allows for consent to act as a director [documents] to be done using electronic means,” he said.

Mr Dunn said SMSFs would form a much larger part of the second phase of the government’s reforms in this area.

“There are some issues and things that need to be considered that are different under these proposed rules versus Electronic Transactions Act rules around consent, and the fact that you’ll be able to provide a link to that document rather than having to serve that particular document. These are all things that Treasury is working through with industry at the moment,” he explained.

Treasury is currently consulting with the SMSF Association and other experts in the industry, including Mr Dunn, regarding its modernising of business communications project.

Mr Dunn noted that there is a bill currently before Parliament, Treasury Laws Amendment (Modernising Business Communications) Bill 2022, which, once enacted, will enable all documents under the Corporations Act to be signed or executed electronically.

“In principle, that’s where we want to get to with the SIS measures,” he stated.

“Now, there may be some question marks around testamentary documents. If we think about binding death benefit nominations, should there be a straight-through process that wouldn’t necessarily require witnessing to be able to verify who that person is?”

Mr Dunn said there are some potential concerns with elder abuse that have been raised and the fact that advanced technology in this way may create outcomes that weren’t necessarily intended by expanding electronic execution to these types of testamentary documents.

“By and large, and we’re looking at electronic execution for things that are in the SIS Regulations. So financial statements and things like the in-house asset rules where section 82 requires a plan to be provided. That cannot be done in any other form other than wet ink as it currently stands,” he explained.

“We also have requirements around the duty to keep minutes and records. We have five-year and 10-year requirements. There’s an opportunity here to think about time frames of retention for certain documents, even where we think about decisions around changes of trustees and other things that require a minimum of 10 years. In an electronic time frame, should there be something that requires that to be presented for much longer and are there other documents that should be much shorter?”

These are some of the considerations that will come up for discussion as part of the process, said Mr Dunn.

“As it currently stands within SIS regulation 4.09, there is no formal requirement to actually have to have a written investment strategy, but when you think about its application in the marketplace, the ATO makes it very clear in their literature that the expectation is that there is a written strategy.

“There may be some advisors or practitioners that when it goes to audit that say that there’s nothing within the regulations that require a written investment strategy but the auditor, quite rightly will come back and say ‘well I can’t audit what’s in your brain’, so it needs to be put down in paper.

“So again, there’s an opportunity here to tidy up some legislative disconnect to ensure that Reg 4.09, if the expectation that the requirement in regulation 4.09 is that it needs to be a written investment strategy, we should tidy that up at the same time,” he said.