Record Keeping for SMSF’s
Record Keeping Requirements
For example, copies of annual returns must be retained for at least 5 years but records of changes of trustees and minutes recording investment decisions must be kept for at least 10 years.
Wrong Turns – Real Life Examples
1. Maintaining the Chain of Deeds
In 1990 and again in 1998 they updated the provisions of their SMSF trust deed. Their accountant arranges this for them.
In 2002 A and B move to another city. They collect their records from their accountant and engage a local accountant to look after their fund.
That same year, A and B decide to change the trustee of the fund to a corporate trustee – AB Investments Pty Ltd. Their accountant arranges this, but unfortunately A and B fail to hand over the most current trust deed, being the 1998 deed. The change of trustee is effected based on the provisions of the 1990 deed.
In 2013 the trust deed is updated yet again because the fund wants to enter into a limited recourse borrowing arrangement to purchase a property. A and B find the 1998 deed at home and give it to the accountant. The 2013 trust deed update is based on the variation provisions contained in the 1998 trust deed and is signed by AB Investments Pty Ltd.
A and B approach their financier in relation to the loan. The financier reviews the chain of deeds and discovers the anomalies with the deeds which raises the following questions:
The issues are complicated but are eventually the fund’s affairs are put back in order. In doing so the fund incurred legal and other costs and the property the fund was going to buy was sold to someone else.
2. Lost Deals
In 1997 the fund buys a property. A title search for the property shows that ‘LM Holdings Pty Ltd’ is the registered owner.
In 2014 L and M divorce and M becomes the sole member of the fund. A new trustee, Life after L Pty Ltd is appointed.
The appropriate forms are completed to change the name on the title of the property. An application is submitted to the Office of State Revenue (OSR) for concessional stamping.
OSR requests evidence that LM Holdings Pty Ltd owns the property as trustee of the fund. The records showing that company’s appointment as trustee in 1993 have been lost. The contract of sale (which showed ‘LM Holdings Pty Ltd as trustee for the L & M Super Fund’ as purchaser) has also been lost.
Eventually other fund records were produced satisfying OSR that LM Holdings Pty Ltd own the property as trustee for the fund. However it would have been a much simpler and cheaper exercise if the original appointment of trustee and contract of sale records were available.
L and M were under no obligation to retain the above records as they relate to transactions occurring 20 years ago. However, trustees should keep in mind that other authorities such as OSR and the titles office may require copies of documents to be produced from the very beginning of the establishment of the fund.
Prevention is Better than Cure
Problems are usually not identified until certain events occur such as divorce or the purchase of a property where time can be of the essence.