Modernising measures to tackle SMSF document ‘minefield’

As such, he urged advisers to be abreast of the incoming changes to remain compliant.

“You might assume that it can be done in a certain way but you need to be sure that the deed and the construct of other related documents would allow for that,” Mr Dunn underscored.

“Make sure that the fund’s governing rules are explicit around the technology-neutral way in which things might occur. Make sure they don’t stipulate that only digital signatures or only physically hand-written signatures are acceptable for something like an in-house asset plan.”

During his session at the SMSF Adviser Technical Strategy Day, Mr Dunn will outline the new era of SMSF document management and challenge advisers on how their processes would evolve as the SMSF sector digitises.

What advisers need to be ‘acutely’ aware of

The SMSF documentation process can be a “minefield”, and as such, advisers must be “acutely” aware of the processes, Mr Dunn emphasised.

For example, he explained, while the Electronic Transactions Act 1999 intended to allow SMSF members to conduct their activities in an electronic form (like digitally signing a document), the Corporations Act 2001 and the Superannuation Industry (Supervision Act 1993 (SIS Act) are exempt from it.

This means members cannot use a technology-neutral approach to signing certain documents where the superannuation laws require it to be done in written format, Mr Dunn said.

On the other hand, under the Income Tax Assessment Act 1997, a client can sign their individual tax return electronically because this act is not exempt from the Electronic Transactions Act.

“When a client signs an ATO trustee declaration form – which is a requirement within section 104 A of the SIS Act – the law says that a trustee must sign the declaration within the prescribed time frame of becoming a trustee or director (21 days),” Mr Dunn said.

“The idea behind the Electronic Transactions Act is that that signature could be digital or written. However, because the Electronic Transactions Act does not apply to the sections of the SIS Act, it must still be done in wet ink.”

He continued: “This is where it becomes quite tricky because we’re now starting to see exceptions to the exemptions (double negatives). For example, during COVID, they said they will create an exception to the exemption for financial statements, (specifically section 35B), and allow for the Electronic Transactions Act to apply.

“Therefore, members could sign statements either digitally or physically, or sign and scan them, and send them to another person and they could sign them.”

Where advisers might get caught out

Mr Dunn warned that members and advisers could become entangled in these nuances because the rules are not uniform.

“A good example of this is the trust deed, which can permanently be signed in an electronic form or via wet ink and the Corporations Act has been amended to allow for that to occur,” he said

“There are other documents that are relevant under the superannuation laws that must be signed in wet ink form because the exemption doesn’t apply. There are other requirements under the law but the procedures are actually set out within the SMSF trust deed.

“Therefore, we need to go back to the deed to understand whether that document can be done within an electronic environment or wet ink environment.”

“These are just some examples that illustrate what a minefield this is,” he pointed out.

Mr Dunn – who was involved in Treasury’s consultation on its plans to bring Treasury portfolio laws into the technology neutrality framework throughout 2022 – said Treasury is seeking to implement a universally accepted model (section 110A of the Corporations Act) into other Treasury law portfolios.

This, he said, would incorporate the SIS Act and regulations to enable a uniform and acceptable process under the Electronic Transactions Act for activities like signing a trustee declaration, which in the past would have required a written form.

While there is no concrete time frame around when these laws would come into effect, Mr Dunn said most measures have either become law or are before Parliament.

He cautioned that even after these laws are passed, advisers should understand the technology before determining if their clients would benefit from using them.

“Just because the technology is available and efficient, doesn’t mean it can or should be used,” he said.

“Advisers need to understand what that process looks like for their practice and clients, and how they will manage risks.”

To hear from Aaron Dunn about how to get ahead of the game and remain compliant with the latest SMSF documentation requirements, come along to the SMSF Adviser Technical Strategy Day 2023.

It will be held in the following locations:

Tuesday, 17 October at the Four Seasons Hotel, Sydney

Wednesday, 18 October at Rydges Southbank, Brisbane

Wednesday, 25 October at Grand Hyatt, Melbourne

Click here to buy tickets and don’t miss out!

For more information, including speakers and agenda, click here.