A technical executive has advised SMSF trustees to consider adopting a special resolution mandating the signatures of all members of the fund when preparing financial statements for an annual audit in order to avoid disputes and potential compliance risks.
Speaking at Accurium’s SMSF Compliance Day in Sydney today, Accurium head of education Mark Ellem noted the introduction of legislation allowing for six-member SMSFs in 2021 and a change in signatory requirements may necessitate this approach to record-keeping.
“Remember from a signing point of view, because we’ve gone from a maximum of four [trustees] in a fund to six in a fund, we’ve now got changes in the signing rules,” Ellem said.
“I think from a practice perspective, there needs to be some document, maybe a resolution, where all the directors sign accepting a financial statement.”
With the introduction of the legislation, the new signatory requirements specify if an SMSF has four members, a minimum of two individual trustees or two corporate trustee directors must endorse the fund’s financial statements.
Further, if an SMSF consists of five or more members, a minimum of three individual trustees or three corporate trustee directors must provide their signatures to approve the final financial position of the fund.
To that end, Ellem highlighted the complexities that could arise when navigating the process of obtaining approval from multiple trustees and directors who play a role in overseeing an SMSF.
“Is there a limit on the number of trustees for an SMSF, there’s a limit on members, [but] is there a limit on trustees? What if each of the four members in the fund have separate attorneys and each one has two attorneys?” he said.
“You can have multiple trustees or multiple directors, so you could have a six-member fund and a 12-director company.”
According to Ellem, the use of a resolution could potentially negate the risk of a dispute and ensure the fund remains compliant.
“I would still have a resolution where all of them sign. You don’t want a situation where the ones that didn’t sign the financial statement go ‘I didn’t agree with those figures’,” he noted.