By Graeme Colley

What records should be kept, when and for how long? Some SMSFs have resolutions and minutes for every investment transaction while others don’t go into much detail at all. But what level of detail is really necessary? The answer lies in your fund’s trust deed, investment strategy and what is required by the tax and superannuation legislation. 

Every time an SMSF makes or disposes of an investment, the transaction needs to be seen in the context of the fund’s investment strategy and the degree to which allowable asset classes, ranges and allocations are specified in that strategy. This will have a bearing on the amount of documentation required.

The SIS legislation does not include specific provisions for recording SMSF investments. This means that investment reporting requirements for all superannuation funds apply to SMSFs as well. In this context, it seems reasonable the more detailed your fund’s investment strategy the less likely it is to record investment decisions. However, in contrast, an investment strategy written in very general terms may mean recording of investment transactions more frequently and in greater detail.

For example, a fund with a single balanced option is unlikely to have meet each time a contribution is made to decide where the money should go. In contrast, if the fund’s investment strategy is couched in broad terms and a member wishes to select specific investments as permitted by the fund’s trust deed, then documents indicating whether the selection is consistent with the overall investment strategy of the fund is likely to be worthwhile.

There are some areas where best practice seems to dictate that you should prepare detailed documentation and/or minutes especially where the transaction is linked to specific provisions of the SIS Act and Regulations. Examples would include:

• Acquisition of direct property – which can be owned wholly by the fund or owned jointly with other parties. Documents would include those relating to the purchase of the property, rental agreements, agent appointments, plus those relating to service providers to handle repairs and maintenance.
• Any collectible or artwork which requires documentation relating to insurance, storage and possible leasing, which may be required due to the legislation.
• Loans by the SMSF to related and non-related parties which require a written loan agreement specifying the terms and conditions of the loan.
• Any ‘in specie’ contribution or acquisition of an investment – which needs to be tested against the acquisition of assets from related parties and accompanied by a minute stating the transaction is permitted.
• Any in-house asset acquisition should be documented, as the 5% testing of the amount needs to be verified at time of acquisition, as well as outlining how the ongoing monitoring of the limit will be conducted.
• Finally, any investment where the trustees act more in the capacity of investment manager, rather than trustee should be documented as the terms and conditions of the investment should be documented.

Trustees should affirm the investment strategy at least annually noting whether all current investments are consistent with that strategy. This will then cover any other investment related transactions that do not require specific documentation.

Make sure you review the investment strategy or vary it when certain member-related events occur. This would include admission, resignation or death of a new member, or the commencement of a pension benefit or lump sum.

Other good reasons for recording information about the fund’s investments relate to the trustees being challenged. Documenting an investment decision can be used as a legal defence to justify why it was made. Documentation assists auditors in carrying out their responsibilities under the SIS legislation and for reporting to the ATO as regulator of SMSFs.

The superannuation law requires that some records must be retained for various periods. For example, the fund’s accounting records, annual returns and other statements are required to be kept for at least five years. However, minutes of meetings such as reviewing the fund’s investment strategy, changes of trustees, member reports and storage of collectables and personal use assets need to be kept for at least 10 years. Documents like the fund’s trust deed and other essential documents should be retained if the trustees consider the fund may be subject to challenge.

Keeping records for an SMSF serve many purposes to provide a ‘corporate memory’ for the fund which may be required for compliance purposes as well as to protect you as trustee from any unfounded challenges.

More about SMSF record keeping

SMSF minutes and resolutions – do they matter?

SMSF record keeping: Do you know the rules – and penalties?