SMSF TechnicalElectronic signatures for SMSFs - Compliant and Accepted by the ATO

April 14, 2020by Grow SMSF0

Using electronic signatures for SMSFs is not only legal, it’s virtually mandatory to deliver SMSF documents such as accounts, annual returns and trustee minutes in an efficient and compliant way. Grow has used electronic signatures from day one to provide an easier way to get your SMSF documents signed.

Whether its DocuSign, PleaseSign or Adobe Sign most electronic signature solutions that can be used for signing SMSF documents are easy to use, secure and compliant.  SMSF trustees can use electronic signatures on any device anywhere in the world – all you need is an email address.

Is it OK to use electronic signatures for SMSFs?

Even before the introduction of the Federal and State based Electronic Transactions Acts (circa 1999) signing ‘electronically’ was legally accepted for many commercial documents including documents lodged with the ATO.

In Australia the use of electronic signatures is covered by Section 10 of the Electronic Transactions Act 1999.  Where there is a requirement under law for a signature to be provided, the requirement is considered to be met when:

  • A method is used to identify the person
  • There is confirmation of the persons intention regarding the information (i.e. they cannot accidentally or unintentionally sign something)
  • The method used is reliable and appropriate in the situation
  • The method used can be proven (either by itself of with other evidence) to meet the first two requirements above
  • The method used is acceptable for the person or entity to whom the signature is required to be given

Although the technology underpinning electronic signatures for SMSFs has changed significantly over the last 20 years, in many cases making it easier, the above principles have not changed.  Electronic signatures are fit for purpose for virtually all types of SMSF documents.

There was also an updated to the Electronic Transactions Regulations 2020 in July 2020 which specifically confirmed that SMSF financial statements can be signed electronically and are covered by the ETA (i.e. the SIS Act is excluded in general however certain sections including s38B which is the signing of financial statements is excluded from exclusions).

SIS Act s35B Financial Statements Electronic Signatures for SMSFs

 

Benefits of digital and online signing

There are a number of benefits of using electronic signatures compared to handwritten wet-ink signatures including:

  • Time saving – you don’t have to wait for documents in the post, and because we get the signed documents back from you quicker, we can lodge your return faster – which is fantastic when you fund is going to receive a refund of franking credits!
  • Convenience – you have the ability to sign your documents wherever you are – provided you have access to your email account your geographic location is irrelevant.  This is great if you are traveling.
  • Flexibility – prior to signing anything you still have the option of printing the entire document or specific pages to enable a review of the hard copy.  Likewise, we can still provide a hard copy for your records.
  • Environment – electronic methods can significantly reduce or eliminate the negative impact of printing large quantities of paper and sending them via post or courier. Electronic signatures help the environment significantly.

 

Does the ATO accept electronic signatures for SMSFs?

Yes. The ATO is very comfortable with electronic signatures as well as less formal electronic declarations for certain documents that are lodged with them.

The ATO provides further information on their website here: Client declarations – FAQs and examples.

With COVID-19 impacting many aspects of business and life in general, the ATO has re-affirmed the use if digital and electronic signatures for SMSFs and other tax and financial documents. On the ATO website, the following COVID-19 FAQ has been provided (23 April 2020):

Signature requirements for financial statements

Question: I usually attend my accountant’s premises to sign my SMSF’s financial statements. However, I am unable to attend in person to sign them this year due to COVID-19. How can I meet the signature requirements?

Answer: There are options available. Under the super laws, SMSF trustees are required to sign their SMSF’s financial statements before finalising their fund’s audit each income year. COVID-19 impacts such as social distancing or isolation requirements or your tax agent or accountant working from a home office may prevent you from signing your SMSF’s financial statements in person this year.

Alternative options available for signing the financial statements consist of returning a signed scanned copy to your tax agent or accountant by email or using an electronic signature such as a digital signature. Digital signatures should be provided:

  • using a secure system, typically through an established third-party provider
  • in a way that clearly identifies the trustee signing and indicates the approval you are providing.

A secure system would include a system that requires a personal identification number, access code or password to use.

If you can’t use these alternative options to sign your financial statements, your agent or accountant should post the financial statements to you and you will need to sign them and arrange to return them to your agent by post.

You will not meet the signature requirement if you only acknowledge the financial statements by email or over the phone.

This question was last updated on 23 April 2020.

It’s important to note that the above is not a temporary measure related to COVID-19.  The ATO has always taken a pragmatic approach to technology including digital and electronic signatures, and we can confirm as tax agents virtually all of our dealings and declarations are made electronically via the ATOs online services.

Can an SMSF trust deed be signed electronically?

When setting up and SMSF, can you sign the SMSF trust deed (deed of establishment) electronically? It depends!

Corporate trustee of an SMSF

Using a special purpose trustee company for an SMSF is recommended compared to using individual trustees. In addition it may also help facilitate the signing of an SMSF trust deed using an electronic signature. As per the below, the Determination modifies the Corporations Act with the clear intention of enabling a company to sign deeds including:

  • Deed of establishment
  • Deed of variation
  • Bare trust deed
  • Deed of appointment and removal of trustee etc.

Unfortunately the time of writing, the measure are only temporary and set to expire in March 2021.  Let’s hope that they become a permanent fixture of the law as this change is well overdue. A more detailed analysis of the electronic signing of SMSF trust deeds will be provided in a future article.

UPDATE 21 October 2020: Draft legislation has been released that will change applicable laws to permanently enable the electronic signing of SMSF trust deeds.

Temporary COVID-19 measures – companies

Where an SMSF is established with a company trustee, there have been changes to the Corporations Act which temporarily enable (according to popular legal opinion) the company directors to sign an SMSF trust deed electronically through to 21 March 2021.  Details of the change is below:

The Corporations (Coronavirus Economic Response) Determination (No. 1) 2020 (“Determination”) modifies section 127(1) of the Corporations Act so that a company may execute a document without a common seal if 2 directors, a director and company secretary or the sole director/secretary of a proprietary company by signing a counterpart of the document in physical form or using an electronic communication which reliably identifies the person and indicated their intention to execute the document on behalf of the company.

 

Other questions relating to electronic signatures for SMSFs

The following are other questions we’ve been asked in relation to electronic and digital signatures for self managed super funds:

Does an electronic signature need to look like a ‘real’ signature?

No. It is not a legal requirement for the signature to look identical to a persons handwritten / wet ink signature.

Does each person signing need their own email address?

Highly recommended. To meet the legal requirements of electronic signatures under the Electronic Transactions Act 1999, each signatory must be identified and the electronic signing process must confirm their intent to sign.

If trustees of an SMSF share an email account / address, it is difficult to confirm these requirements.

Is signing electronically secure?

Yes. All common third-party electronic signature providers meet or exceed national and international security standards, including strict security policies and practices that set the standard for world-class information security.

Will the SMSF auditors accept an electronic signature?

Yes.  We’ve worked with some of the top SMSF auditors in the country and provided there are correct procedures in place around their use, they are more than comfortable with key SMSF documents being signed electronically. The following article from ASF Audits explains their recent views: Why COVID-19 will fast-track the use of e-signatures

 

If you have any questions regarding this article, please contact us.

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