{"id":1434,"date":"2023-01-11T05:18:57","date_gmt":"2023-01-11T05:18:57","guid":{"rendered":"https:\/\/actinvest.com.au\/?p=1434"},"modified":"2023-01-11T05:18:57","modified_gmt":"2023-01-11T05:18:57","slug":"auditor-flags-surprising-traps-with-e-signatures-and-smsfs","status":"publish","type":"post","link":"https:\/\/actinvest.com.au\/index.php\/auditor-flags-surprising-traps-with-e-signatures-and-smsfs\/","title":{"rendered":"Auditor flags surprising traps with e-signatures and SMSFs"},"content":{"rendered":"

A specialist auditor has explained some of the grey areas and confusing aspects of electronic signatures and SMSF documents.<\/strong><\/p>\n

\"\"<\/p>\n

.<\/p>\n

Speaking in a recent webinar, ASF Audits head of education Shelley Banton explained there is a lot of misinformation surrounding when e-signatures can and can\u2019t be used in relation to SMSF documents.<\/p>\n

The current law that applies to e-signatures is the\u00a0Electronic Transactions Act 1999<\/em>\u00a0(ETA), said Ms Banton, which ensures that a transaction signed under Commonwealth law will not be invalid because it was conducted through electronic communication.<\/p>\n

\u201cThe ETA applies to all Commonwealth Laws unless they\u2019re specifically exempted by the Electronic Transactions Regulations 2000 (ETR) under schedule 1. Both the SIS and\u00a0Corporations Act<\/em>\u00a0are exempted under the ETR,\u201d she said.<\/p>\n

\u201cThis means that all of those documents associated with the SIS and\u00a0Corporations Act<\/em>\u00a0may still require wet signatures. So what we need to do here is dig deeper to work out whether a document can be electronically signed or not.\u201d<\/p>\n

Ms Banton noted that Treasury is currently reviewing section 127 of the\u00a0Corporations Act<\/em>\u00a0which will allow all documents including SMSF documents to be signed electronically.<\/p>\n

While a bill was previously introduced into Parliament last year, it lapsed when the Federal Election was called, she said.<\/p>\n

\u201cSo watch this space but I don\u2019t think we\u2019re going to see any action here anytime soon,\u201d she noted.<\/p>\n

Financial statements<\/strong><\/p>\n

Ms Banton said most of the SMSF industry has been getting financial statements signed electronically since at least 2014.<\/p>\n

\u201cThe reality is that it was never actually allowed under the ETA because as we know, the SIS legislation is exempt under the ETR. We have section 35B which says that the accounts of a fund must be prepared and signed and retained for a period of a five years,\u201d she stated.<\/p>\n

\u201cSo technically, financials could never be electronically signed. Luckily the ATO picked this up during Covid and updated the ETR in July 2020 to specially carve out section 35B of SIS which are now exempted under the ETR.\u201d<\/p>\n

This means the industry is now in a much better position as all financials electronically signed will comply regardless of whether they were signed previously or now, explained Ms Banton.<\/p>\n

SIS laws exempted from the ETA 1999<\/strong><\/p>\n

Ms Banton said it\u2019s important to be aware that there are a wide range of laws under SIS which are exempted from the ETA and not covered by the ETR 2020.<\/p>\n

Most of these regulations are concerned with record retention but there is also a wide range of documents which must be signed with a wet signature she explained.<\/p>\n

\u201cThe first one is an in-house asset written plan. [There is also] trustee declarations, trustee consents and also the storage decision for a collectable and personal use asset which is interesting,\u201d she said.<\/p>\n

\u201cThe other one is an investment strategy. While we don\u2019t have to write an investment strategy under regulation 4.09 we can\u2019t audit memory so they ATO stipulate that it must be written down.\u201d<\/p>\n

Ms Banton said this has left the SMSF industry with a dichotomy in regard to investment strategies.<\/p>\n

\u201cSIS says that the investment strategy doesn\u2019t have to be written down but we know it does. There\u2019s an exemption in place for the SIS laws which means it\u2019s a little bit unclear as to whether the investment strategy can be signed electronically or not,\u201d she said.<\/p>\n

\u201cHaving said that, when we see them at audit we do tend to accept them because it is a bit of a grey area.\u201d<\/p>\n

Permanent SMSF documents that can and can\u2019t be signed electronically<\/strong><\/p>\n

Trust deed establishments and upgrades<\/em><\/p>\n

Electronic signatures for trust deeds were introduced as a temporary merger during COVID-19 which became permanent following the passage of the\u00a0Corporations Amendment (Meetings and Documents) Bill 2021<\/em>, which received royal assent on 22 February 2022, said Ms Banton.<\/p>\n

\u201cSo the establishment deed can be signed electronically. However, the witnessing requirements are set down state by state which means that while the deed may be signed electronically, it may not be able to be fully executed by electronic signature if the state or territory requires a wet signature to witness it,\u201d she cautioned.<\/p>\n

\u201cIf there\u2019s a trust deed upgrade or a change to the constitution, that\u2019s allowed under s127(1) of the\u00a0Corporations Act<\/em>, which means a document can be signed either electronically or by a wet signature because it doesn\u2019t need to be witnessed.\u201d<\/p>\n

Member applications and trustee minutes<\/em><\/p>\n

Ms Banton said while member applications and trustee minutes do fall under the technology neutral reforms, it is important to review the trust deed to see what the rules are.<\/p>\n

The trust deed will set out the procedures for signing which the trustees need to comply with, she noted.<\/p>\n

\u201cSo, it\u2019s possible that these documents may require a wet signature, you just have to read the deed,\u201d she advised.<\/p>\n

\u201cI would assume that in most cases, especially for recent deeds, there\u2019s going to be no requirement for a wet signature and they can be electronically signed.\u201d<\/p>\n

Consent to act as a trustee and ATO trustee declaration<\/em><\/p>\n

A consent to act as a trustee and an ATO trustee declaration are both a \u201chard no\u201d when it comes to electronic signatures, warned Ms Banton.<\/p>\n

\u201cA consent to act as a trustee is exempted under SIS so it requires a wet signature. As does section 201.D of the\u00a0Corporations Act<\/em>,\u201d she said.<\/p>\n

\u201cSimilarly you\u2019ve got section 104A of the SIS which is the signing of the ATO trustee declaration which can\u2019t be signed electronically at this point in time.\u201d<\/p>\n

What this means is that while these two documents may have been prepared correctly if an electronic signature was used, they haven\u2019t been properly executed, she warned.<\/p>\n

\u201cThis could be a potential limitation issue if the fund was ever in front of a court of law,\u201d she stated.<\/p>\n

\u201cSo from a practice point of view, you might want to consider how you\u2019re getting your clients to sign these particular documents and review your proof procedures if they\u2019re being signed electronically.\u201d<\/p>\n

\u00a0<\/p>\n

\u00a0<\/p>\n

By Legal
\n06 January 2023
\nsmsfadviser.com<\/p>\n","protected":false},"excerpt":{"rendered":"

A specialist auditor has explained some of the grey areas and confusing aspects of electronic signatures and SMSF documents.<\/strong><\/p>\n","protected":false},"author":1,"featured_media":1435,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[4],"tags":[],"_links":{"self":[{"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/posts\/1434"}],"collection":[{"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/comments?post=1434"}],"version-history":[{"count":1,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/posts\/1434\/revisions"}],"predecessor-version":[{"id":1436,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/posts\/1434\/revisions\/1436"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/media\/1435"}],"wp:attachment":[{"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/media?parent=1434"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/categories?post=1434"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/tags?post=1434"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}