Permanent records - what are they and can we stop keeping them?

No one is going to disagree – good record keeping is essential for any SMSF. But as the years click over and more work is undertaken online, it begs the question – do we still need to keep all those 'old records'?

There are some good reasons to.

Superannuation law requires trustees to retain records, often for minimum time frames (some quite long!). Documents include accounting records (5 years), trustee minutes (10 years), records of changes of trustees/directors and consents to act (10 years), Trustee Declarations (at least 10 years and whilst remain as a trustee/director) and member reports (10 years). 

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.  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 timeframes 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. 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 (including the original trust deed and any subsequent variations) is essential.

The decision to retain original ‘paper’ documents when you have electronic copies is also an important one.  Considerations include whether:

• the record will be regarded as being kept in Australia (a requirement for some records),
• the documents will be in a form that is readily accessible,
• if original documents will be still be required for other purposes, such as for stamping by the Titles office or when dealing with financial institutions etc
• all relevant legislation permits documentation to be retained in electronic format only

For example, whilst the ATO have 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. 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.

But what can be done when critical documents can’t be found? Be sure to join us for our session “Changing Auditors and Administrators” at our upcoming Superannuation Intensive Day when we’ll work through the practical solutions we’ve developed over our many years of administering SMSFs.  

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