One of the emerging issues from COVID-19 is the delay to SMSF trustees providing signed documentation. And while the ATO has produced a much-needed extension to June 30 for SAR lodgment, the reality of an entire nation self isolating and working from home has hit hard.
For those SMSF professionals already using an electronic service provider so clients can digitally sign documents such as minutes and financial statements, it will be business as usual. The rest will struggle.
There have been some suggestions within the industry that SMSF auditors will accept email confirmation for signed financial statements which is required by SMSF auditors under s35B SISA.
Not only would this be a breach of the auditing standards, but it would also mean SMSF auditors are not covered by their professional indemnity insurance. Epic fail.
The ability of clients to sign documents within minutes of receiving them, regardless of where they are in the world, cannot be underestimated. E-signatures help avoid significant delays in business generally, and in completing an SMSF audit, especially when amended documents have to be resigned.
In the past, there have been concerns that some trustees who are not computer literate cannot e-sign a document. Some clients live in remote locations without access to the internet or don't trust the safety and integrity of the process. It's time to adapt to the new normal under COVID-19 and start looking for better ways to do business.
Since e-signature technology was first introduced in 1989, there have been significant developments leading to a new standard of embedded cryptographic mechanisms that provide secure and accurate identification.
Other benefits of e-technology include authenticity verification and document integrity verification, which confirms whether the signed content changed after it was signed.
The Electronic Transactions Act 1999 - Section 10 ('ETA1999') allows electronic signatures to be used for financial statements and other documents.
While Regulation 4 Schedule 1 of the Electronic Transactions Regulations 2000 ('ETR 2000') provides an impediment to use e-signatures for certain sections of the SIS Act, there is no fundamental principle of contract and commercial law that prevents contracts, or documents, being formed electronically.
The purpose of the law was changed in 2000 due to the light of the emerging and unknown digital channels. This was seen as being necessary to safeguard the industry and ensure the provisions in the Federal Act would apply to more legislation and transactions.
While a legal impediment exists under the ETR 2000, the common practice is that e-signatures are being used within the SMSF industry for documents required under SIS.
The ATO is aware of the different laws and intends to use the Coronavirus Economic Package Bill to fix the issue retrospectively. There is no intention for any compliance action to be taken where e-signatures are used to sign SMSF documents as outlined in the ETA 1999.
Given the current circumstances, a common sense approach must be taken to ensure the integrity and safety of the superannuation system continues to prevail.
Future action will see proposed amendments to the ETR 2000 to see continued use of e-signatures prevail within the SMSF industry.
There will always be a way to obtain client signatures on SMSF documents, even if it includes using Australian Post or getting a courier to deliver documents to speed up the process for signatures on hard copies.
Email is always fraught with the unknown, such as sending the wrong attachment to a trustee making their email confirmation null and void.
The current situation is an opportunity for SMSF advisers who have been hesitant to adopt the use of e-signatures in their practice consider their approach.
It may be that COVID-19 is the perfect storm to fast-track the widespread use of e-signatures within the SMSF industry.
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