From XU Magazine, 
Issue 20

Keep your SMSF records – but which ones?

You’ve been running your SMSF for a while and have amassed a lot of information about your fund. You know that your SMSF must keep some records but which ones do you keep, how long for and where do you store them? Let’s see what you need to do…
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Superannuation law and record keeping

The Superannuation Industry (Supervision) Act 1994 (SIS Act) requires you to keep accounting records that:

  • Correctly record and explain the fundís transactions and financial position;
  • Enable annual financial statements such as a Statement of Financial Position and Operating Statement to be prepared; and
  • Allow the preparation and lodgement of your SMSFís annual income tax and compliance return to be lodged with the ATO.

In simple terms, as trustee of your SMSF, you need to keep records that allow preparation of financial statements and annual tax and compliance returns. This information needs to be kept for at least five years after the end of the financial year, even after your SMSF has been wound up.

There are some records your SMSF must keep for at least 10 years which relate mainly to the underlying operation of the fund. They are:

Trustee resolutions and minutes of meetings;

  • Change of trustee notices;
  • Trustee declarations that acknowledge the obligations and responsibilities as trustee;
  • Copies of a Trusteeís consent to be appointed as trustee of the SMSF;
  • All reports provided to members such as an annual member statement;
  • Decisions about the storage of “collectables and personal use assets”; and
  • Certain grandfathering elections made by the fund involving pre 11 August 1999 fund investments.

Not keeping the fund’s records

If your SMSF doesn’t keep the records for at least the time required you may be penalised.

It’s interesting to note that there is no requirement to keep a copy of the fund’s trust deed, any subsequent amendments and other governing rules for the fund. However, common sense dictates that itís essential to keep the originals in case the payment of benefits or other decisions of the trustee is challenged at any time. Keeping these records for at least five years after the final tax and regulatory returns have been lodged would seem a reasonable time.

What needs to be kept for tax purposes?

For tax purposes there are record keeping and substantiation requirements that must be met by your SMSF. This includes copies of receipts and invoices to justify any deductions and income received by the fund from dividends, rent, interest and so on. This information is required to be kept by the fund for at least five years from the lodgement of the relevant income tax and regulatory return.

Any information that supports the calculation of any capital gains or losses on assets owned by your SMSF is also required to be kept. Your SMSF may need to retain these records for a lot longer than you would think. For example, if your SMSF acquired assets many years ago, the purchase price plus other expenses need to be retained to justify the cost base of the asset and kept in the fund records until at least five years after the asset has been sold. If company shares are involved and the fund has taken up a dividend reinvestment plan, then the cost of the shares received in lieu of the dividends will need to be recorded.

Experience has shown that ATO audits have required a copy of the buy contract for listed shares as well as a sell contract plus details of any shares acquired as part of a dividend reinvestment plan. So an SMSF that has good records will reap the benefits of keeping a regulator happy.

In some situations your SMSF may need to be registered for GST and PAYG purposes. For GST the SMSF may need to lodge a BAS statement regularly and for PAYG purposes any amounts deducted from taxable pension payments will need to be recorded and paid to the ATO as required. If you have rolled over a benefit into or out of your SMSF, a copy of the rollover statement will be kept by the fund.

Storing and keeping the fund’s records

Your SMSF’s records must be kept in Australia, in writing and in the English language or in a form that can be readily converted into English.

The ATO permits the fund records to be kept in an electronic format providing it is easy to access and verify. With this in mind the ATO requirement allows trustees to maintain many of the fund records, receipts, statements and notices electronically which saves on storage space. But there are some documents that the trustees need to keep in their original form, for example:

  • The fund’s trust deed, any amendments or upgrades thereto;
  • Change of trustee documents;
  • If the fund has a company as trustee, a copy of the company constitution;
  • Trustee resolutions and minutes; and
  • The fundís investment strategy.

Courts and government departments may require an original or a certified original of the document which is the reason to keep originals of the most important fund documents.

As an individual trustee or director of the corporate trustee, you are responsible for retaining and storing records. If stored electronically it may save space but be conscious of the time the records need to be retained.

Do you know which records need to be kept for at least five and 10 years?

With a new tax year having just commenced, your new yearís resolution could be to review your SMSF’s records and work out which need to be retained as originals and those that can be scanned and stored electronically – but make sure you keep a backup copy in case a disaster strikes.

Why leave it there?

Learn about SMSF software, services and technical education

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