In a recent online article, SuperConcepts executive manager, SMSF technical and strategic services, Philip La Greca said it’s important that SMSF trustees are aware of what documents they need to save in relation to their fund and for how long.
Mr La Greca explained that the SIS legislation not only specifies what documents need to be kept but also the minimum retention timeframes for these obligations.
“These obligations include record-keeping for accounting purposes covering not just the existing accounts and financial statements but also the supporting records, which need to be maintained for at least five years and located in Australia,” said Mr La Greca.
“All trustee minutes are required to be kept for at least 10 years.”
Records relating to trustee changes such as deeds of retirement and appointment of trustees, consents to act as a trustee, trustee statements about disqualified person status and ATO trustee declarations also need to be retained for 10 years, he added.
“The final SIS obligation covers the retention of member reports for at least 10 years, which covers members’ annual statements and other communication given to the members by the trustees, such as pension commencement information and benefit payment information,” he explained.
Mr La Greca warned that during the annual audit for an SMSF, an auditor will check to see that these obligations have been met.
“It is important to note that these SIS record-keeping obligations are an operating standard and are subject to an administrative fine of 10 penalty units. From January 2023, each penalty unit will be worth $275, so failure to keep these records could result in a fine of $2,750,” he cautioned.
Just like any other taxpayer, Mr La Greca noted that SMSFs also have tax record retention obligations which require records to be kept for at least five years.
“These records do overlap to an extent with the accounting records that need to be kept for your SIS obligations, but it does extend beyond just the accounting records to include things like income statement summaries and receipts that are the supporting documents, not just the financial transactions,” he explained.
Mr La Greca said there is also a whole range of other documents that trustees should retain that are not specifically covered by these record-keeping obligations.
“Some of these documents relate to the actual structure of the SMSF, such as the trust deed and subsequent amendments, as well as the company constitution if there is a corporate trustee for the SMSF,” he stated.
“Now while you might think that there is no question that you must keep these documents, it is remarkable how often it is challenging to locate the actual executed deed of the SMSF.”
Other key documents that should be retained, said Mr La Greca, include bare trust deeds, loan agreements, purchase contracts and leases that relate to any limited recourse borrowing arrangement put in place by the SMSF.
“The final group of documents to consider for retention would be member instructions. This will cover elements such as members’ requests to receive benefits where trustees would need to have member declarations and evidence of the condition of release being met and documents such as member death benefit nominations.
“These nominations are crucial for SMSFs that do not incorporate nomination information on their annual member statements, as they should provide instructions about how to deal with death benefits in the future,” he said.
Mr La Greca said while the SIS obligations are a key part of funds record keeping and retention processes, “other elements exist in terms of ensuring that the SMSF has all the paperwork that allows it to operate and make future determinations”.
