Documentation gap a real issue

SMSF documentation gap

Advisers need to be conscious of a growing documentation gap in the SMSF sector due to the changing face of interpersonal relationships.

A specialist lawyer has warned SMSF practitioners about a developing documentation gap in the sector stemming from elements such as changing interpersonal relationships in society.

Speaking at the SMSF Association Technical Summit 2022 recently held on the Gold Coast, lawyer Peter Bobbin said: “We’ve got blended relationships, relationships that don’t really exist that people claim to exist, et cetera, and there’s a gap now in documentation.”

Bobbin pointed out the documentation gap does not necessarily need the services of a lawyer to be addressed properly. Instead, the existing deficiency can be identified and rectified using common sense in most circumstances.

“Most of this stuff is done, believe it or not, through common sense. What you’re really looking for is the nature of the gap in documents because the nature of the gap in documents is essentially, when you think it through, critical,” he said.

In extreme cases, he suggested severe action may be needed and may be the only solution.

“Sometimes, because it [involves an] SMSF, if you can’t fill the gap, kill it. Start again because now [you’ll have a] fresh [start],” he said.

“[It will allow you to] do it properly [and] do it appropriately. Kill it and start again.”

He recognised traditionally advisers have not taken this action to correct a problem with documentation and the reason for this can be concerns over the cost involved with winding up an SMSF and establishing a new one in its place.

However, he said this argument had to be balanced against the cost of legal action that may arise due to poor or inadequate documentation.

“[So you think] a good assessment depends upon the transaction costs. The actual application [cost] for a Supreme Court [action] in New South Wales is around $3500. That’s just to put the application in,” he revealed.

“Is that what you [consider] when you talk about transaction costs?”

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