Navigating challenges affecting SMSF record-keeping requirements

She noted the ATO places such importance on record keeping that they require the fund’s auditor to check every year whether these records are being retained. The ATO also could impose administrative penalties on SMSF trustees for failing to satisfy these requirements.

“Trustees also need to retain records for tax law purposes. Documents include annual income tax and regulatory returns, rollover benefit statements, payment summaries and copies of transfer balance account reports lodged,” she said in a blog.

“Fund trustees also need to be able to produce documentation to substantiate the fund’s tax calculations, for example, the cost base of any assets sold.

“Retaining permanent documents beyond statutory time frames may also mean you can assist trustees more readily should they query decisions agreed to in an earlier year. For example, a couple who are divorcing may query the allocation of contributions or benefit payments in prior years.”

Other situations could include a potential challenge by beneficiaries regarding the validity of decision-making including the acceptance of a binding death benefit nomination or the appointment of a trustee, according to Ms Dawson.

This means retaining a full trail of permanent documents such as pension documentation including nominations of a reversionary beneficiary, death benefit nominations and changes to the governing rules is essential.

“The decision to retain original ‘paper’ documents when you have electronic copies is also an important one,” Ms Dawson noted.

Considerations include whether the record will be regarded as being kept in Australia which is a requirement for some records and that the documents will be in a form that is readily accessible.

Furthermore, there needs to be consideration if original documents will still be required for other purposes, such as for stamping by the titles office or when dealing with financial institutions etc and all relevant legislation permits documentation to be retained in electronic format only.

“For example, while the ATO has indicated that, for tax purposes, records may be kept electronically provided certain conditions are met, some parts of the superannuation legislation still require original documents to be retained,” Ms Dawson continued.

“In a pleasing development, the government is currently reviewing record-keeping requirements as part of its broader review to modernise business communications in Australia. 

“There is no question: being able to retain and produce permanent documents when needed is essential for fund trustees.”