Documentation not one dimensional

SMSF documentation

A multifaceted approach is required with regard to SMSF documentation to ensure fund compliance and to limit professional risk.

A specialist lawyer has suggested advisers need to approach SMSF documentation from several different perspectives for the good of the fund and their own risk mitigation.

“Documentation is not just about an ATO audit [even though] clearly that’s important. It is also about professional risk,” lawyer Peter Bobbin told delegates at the SMSF Association Technical Summit 2022 held on the Gold Coast last week.

“That [pertains to] the client, the client’s several advisers, and also you.”

To this end, Bobbin warned delegates about the level of vulnerability a lack of documentation presents for all associated parties.

“Remember I’m a lawyer so that absence of documents opens up the opportunity for what I’m seeking to achieve [with regard to litigation]. That’s my perspective,” he noted.

Further, he pointed out determining what constitutes adequate documentation for an SMSF is not straightforward as demonstrated by the variable nature of the accepted length of time official papers are required to be retained.

“How long do you need to hold onto [fund] documents? As long as is needed,” he said.

When examining the law, he noted for some regulatory reasons official documents are required to be held for a period of 10 years, but for other regulatory reasons this timeframe can differ.

“The Limitation Act [says] it might only be six years. But then the High Court made a comment on that, didn’t it,” he said.

“It found that a negligence action in a superannuation issue could be brought 42 years after the [event triggering the complaint].”

He stipulated practitioners need to consider issues such as who the documents are for, what purpose are they to satisfy, what the current and future potential purpose of the documents are, how they should connect the parties involved, who might be relying on the said papers and who actually has the right to hold the documents.

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