The importance of signed documents

We frequently receive queries from our clients asking why certain documents must be signed and by whom they must be signed.  Other times we may receive partly completed documents which result in further queries and the delay of the audit report being released.  We therefore believe it is timely to highlight the importance of a fund maintaining complete documentation and also state our position in relation to documentation.

As an firm we believe in adopting a best practice approach to our audits as it is in the best interest of all parties (i.e. us, you, your client and the SMSF industry) that we do so.  In relation to the signing of documents we believe a best practice approach is that all necessary documents are fully signed before we release our audit report.  From our perspective an unsigned document leaves the reviewer unable to confirm that the trustee has agreed to, or confirmed, an action the fund has undertaken.  Should disputes later arise between the trustees upon divorce, or the potential beneficiaries following the death of a member, a fund’s records may be called into review and the failure to maintain complete records may make this an even more difficult time or possibly favour one party over the other.

Key documents

Annual financial statements

An SMSF trustee must comply with section 35B(3) of the Superannuation Industry (Supervision) Act 1993 (SISA) which states:

The accounts and statements prepared must be signed as follows:

1. If there is a corporate trustee – by:
   • If there is only one director of the trustee – that director; or
   • Otherwise – at least 2 directors of the corporate trustee; or
2. If there is a group of individual trustees – by at least 2 of these trustees

Section 35B of the SISA is a section on which we are required to report and therefore we will review the financial statements to ensure they have been signed in accordance with the legislation.

Income stream commencement minutes

When an income stream commences it is important that documentation is signed and retained which confirms the terms of the income stream being paid to the member. The fund is able to be taxed more favourably if the income stream is paid in accordance with the SISA and therefore it is in the trustees’ best interest to maintain complete records showing the existence of an income stream.

As auditors the signed commencement minutes confirm the income stream was formally commenced and the fund is entitled to claim the income earned on pension assets as exempt (though reference should also be made to the fund’s trust deed). 

Engagement letter

The engagement letter documents the agreement between the trustees and the auditor on the terms of the engagement.  This includes the confirmation of the scope of the audit and the roles and responsibilities of each party.  The signature from each side of the arrangement shows both parties acknowledge and understand the terms.

Our position is that one of the individual trustees or one of the directors of the corporate trustee can sign this letter on behalf of the other trustees.  However, the trustees should maintain minutes authorising that person to do so.  Additionally, the requirements of the constitution of the corporate trustee should be considered to ensure a single director is able to do this on behalf of the company.

Trustee representation letter

This is a key document for the auditor as there are some aspects of the audit that are difficult or impractical to test and therefore we have to rely on representations by the trustees.  Our position is that each individual trustee or each director of the corporate trustee must provide their personal representation to the auditor by signing the letter.

Notice of intent to claim personal contributions as tax deductible (notice under section 290-170 of the ITAA 1997)

This notice provides confirmation of the member’s intention to claim a contribution as a deduction in their personal income tax return.  Without this signed notice we cannot confirm the fund should classify the contribution as member concessional contribution and therefore it is integral to the audit.  By assisting upon this document for our audit, we are also helping to protect the deductibility of the contribution to the member.

ATO new trustee declaration

Under section 104A of the SISA this declaration must be signed by all new trustees within 21 days of their appointment.  The fund must maintain this signed record for a period of at least 10 years.  We are required to audit trustees’ compliance with this section of the SISA and therefore we will require this signed declaration in the first year of a fund’s operation and in subsequent years if a new individual trustee or director of the corporate trustee is appointed.

Trust Deed

A trust deed formally documents the existence of a trust arrangement between a fund trustee and its members and then outlines the rules particular to that trust arrangement.  Without a properly executed copy of the trust deed there may be some confusion as to what rules apply to the trust arrangement.  It is therefore imperative that a properly executed trust deed be maintained by the trustees and that the trust deed is able to be provided to the auditor for their files.

Conclusion

So whilst we may at times appear pedantic and our actions sometimes hold up the ability to complete and lodge a fund’s annual return with the Australian Taxation Office, our insistence that all necessary documentation is appropriately signed and provided to us is to ensure that the affairs of the fund are in order so as to reduce (or eliminate) the risks for us, for you (our clients) and most importantly YOUR CLIENTS.