Aaron Dunn, CEO & co-founder of Smarter SMSF, said from December 2020 the federal government started to modernise its business communication strategy, including Treasury laws portfolios.
“The Government wanted to create a technology-neutral approach to deal with a number of things under the Electronic Transactions Act but not all Treasury laws are allowed to rely on that,” Mr Dunn said.
“Some of the Treasury laws like the Corporations Act and SIS Act are exempted from Electronic Transactions Act.
“One of those was signing a deed, it is under section 127 of the Corporations Act – a corporate trustee signing a deed or constitution is referenced to that section and is an exception to the exemption.
“That was something that was temporary during Covid and became permanent last year.
“Now an SMSF deed and constitution where a corporate deed exists can be electronically signed.
“However, it is not a corporate deed, trustees have to go to their various State laws to see if it can be signed electronically. Victoria, Queensland and NSW allow this.
“Current data from ATO is that 85 per cent of new SMSFs are being set up with a corporate trustee so exception to the exemption is relevant.”
But Mr Dunn said that is only one part of the equation.
“If someone is setting up a new fund, there are a number of documents that need to be completed and this where it can get quite blurred,” he said.
“The ATO trustee declaration is required to be signed within 21 days after an appointment as director and that sits within the SIS Act and is exempted so it can only be done in wet ink.
“Other documents, like being appointed as director or different roles that may need signing, there is no exemption from the Corporations Act to be signed other than in wet ink.”
A Bill currently before the Senate will allow for digital signatures to be used under the Corporations Act and Mr Dunn said there will be consultation about modernising the SIS laws as part of that project.
“The challenge will be if something has been done incorrectly and then contested in regard to the timing of when it was done, it may invalidate it,” he said.
“It could be they did a BDBN, or signed an ATO document that needed to be done in wet ink and signed electronically and the Electronic Transaction Act did not apply at the time, those documents are invalid.
“So, if someone tried to digitally sign a BDBN and it was bound by the provisions in the SIS Act, if there was a dispute and that nomination was incorrectly completed then it is invalid and the trustee can make any decision they like.
“The flow-on effect is while we may get legislation around it, there are risks around what other institutions will accept an electronic signature. For example, is the bank going to accept a trust deed done electronically or is another certain document eligible to be signed electronically going to be acceptable for next action?
“Internally there will be policies and procedures for various organisations that have to move with the times as well. The fund has to make sure they prepare things to navigate whatever the next step is.”
