By Mark Ellem

So, you have an SMSF which you’ve (helped) run for maybe one, five or ten years, or even longer. The paperwork and records generated over that time can be huge. You know that the SMSF must keep records under superannuation law and income tax law, but the questions are where do you store them and how long must you keep them?

Let’s have a look at what needs to be done.

What the super law requires

Part 4 of the Superannuation Industry (Supervision) Act 1994 (the SIS Act) says that the trustee of an SMSF must maintain accounting records that:

• Correctly record and explain the fund’s transactions and financial position;
• Enable the preparation of a Statement of Financial Position and Operating Statement, essentially the annual financial statements;
• Enable the preparation and lodgement, by the due date, the SMSF Annual Return.

Basically, the SMSF trustee must keep records to ensure an annual set of financial statements and annual return can be prepared. These need to be retained for at least five years after the end of the relevant financial year.

However, some records need to be kept by the fund for at least 10 years. These are:

• Trustee(s) minutes of meetings;
• Change of trustee(s);
• Trustee declarations – this is the declaration that a trustee or director of a corporate trustee signs, acknowledging the obligations and responsibilities of their position;
• A member’s written consent to be appointed as a trustee;
• Copies of all reports given to members, for example an annual member statement;
• Decisions about the storage of assets classified as ‘collectables and personal use assets’;
• An election under section 71E of the SIS Act which relates to a fund that held units in what is known as a ‘pre-11 August 1999 unit trust’. This election was one of the grandfathering options for such investments not to be treated as an ‘in-house asset’.

What happens if I don’t keep these records for the required time?

One of the consequences of not keeping the required records can result in administrative penalties which are personally payable by each individual trustee or the company that is the fund trustee. The specific record keeping contraventions include:

Whilst not specifically covered in the legislation, the SMSF trustee(s) should also retain the fund’s Trust Deed and any subsequent amendments or upgrades. These should be retained for the life of the fund. It would be prudent to retain those documents for a further five years after the final tax and regulatory returns have been lodged.

What records are required to be retained by the income tax law?

There are record keeping and substantiation requirement for all taxpayers, including SMSFs, that must be followed. Receipts and invoices need to be retained to substantiate claims for deductions, as well as documentation to support income disclosed, for example dividend statements; annual trust statements; interest income statements and rental property statements. Generally, a taxpayer must keep such records for five years from the date of lodgement of the return.

Fund records which support the calculation of any capital gain or loss on the disposal of an asset must be retained for at least five years after the income year in which the asset is disposed of or sold – a penalty can be levied for failure to maintain these records. This may require the retention of records for a very long time, for example if the fund acquired shares in a listed company in 2001, the buy contract, substantiating the price paid for the shares and thus the ‘cost base’ for CGT purposes, would need to be retained until five years after the income year in which it was disposed of or sold. We recently experienced an ATO audit of an SMSF which requested a copy of the buy contract of a share sold in the income year under review. The share had been acquired many years prior. Fortunately, the SMSF trustee had good records and could provide a copy of the buy contract. Lucky for them.

Where the fund is required to be registered as a PAYG withholder and issue a Payment Summary Statement for a member in respect of a pension or lump sum benefit payments, there is a requirement to retain the statement issued to the member for five years. This also applies to any Rollover Benefit Payment Statement in relation to rollover either into or out of the fund.

What format are records required to be kept in?

Records are to be kept in writing, in English and in Australia. The ATO allows for fund records to be retained in an electronic format, provided they are easy to access and verify. This will allow trustees to transfer many records, receipts, statements and notices to an electronic form and save on storage space. However, there are some records where the fund must retain the original paper documents. These include:

• The fund’s Trust Deed and any subsequent amendments, upgrades or change of trustee documents. Courts and government departments, for example state titles office, usually will not accept an electronic copy, as it is not the original; 
• The Constitution of the corporate trustee (where the fund has a corporate trustee) – for similar reasons;
• Trustee minutes/resolutions, including the fund’s Investment Strategy document.

There are many obligations for SMSF trustees to retain and store records. If you store those records electronically it may reduce the storage space, but be mindful of the period each record needs to be retained. With the new tax year almost upon us, a New (Income) Year’s resolution may be to review what records need to be retained for your SMSF and which one of those can be scanned and stored electronically. On that note, always ensure that for any electronically stored records, you have a backup process and system in place (not just for your SMSF records, but also those precious memories of stored digital photos!).

Trustees: If you are unsure of which records you can transfer to electronic format and or that you are no longer required to retain, please contact you client services manager. We may already be storing the required records for you and can help you with which records you need to keep.

More about SMSF record keeping

Keeping SMSF records - what, when and how

SMSF minutes and resolutions – do they matter?