Record-keeping is a legal obligation

Keeping proper records is one of a trustee's core duties. The law sets minimum periods for retaining different records, and an auditor checks that the required documentation exists each year.

The obligation covers both the fund's financial records and the records of the trustees' decisions and actions. Failing to keep them can itself be a breach, separate from whatever the records were meant to document.

What to keep and for how long

Some records must be kept for at least five years: accurate accounting records, the fund's annual financial statements and operating statements, copies of the SMSF annual returns lodged, and transfer balance account reports.

Others must be kept for at least ten years: the trust deed, the minutes of Trustee meetings and decisions, records of changes of trustees, trustee declarations, members' written consents and reports given to members.

Why contemporaneous records matter

A decision made by trustees is generally judged on what was known and intended at the time. A record created when the decision was made captures that context; one reconstructed years later, from memory, is weaker and may not be accepted.

If an auditor or the ATO asks why the fund made a particular investment, a dated minute setting out the reasoning is evidence that the trustees turned their minds to it properly.

The decisions worth documenting

Significant decisions worth recording include adopting or reviewing the Investment strategy, making or changing major investments, starting or commuting a pension, accepting large contributions, and decisions about insurance for members.

Decisions involving related parties, in-house assets, property or valuations are particularly worth documenting, because these are areas auditors and the regulator scrutinise closely.

The value of records beyond compliance

Records protect members and trustees if a dispute arises within the fund, if a member dies and benefits must be paid, or if a new trustee takes over and needs to understand what has been done and why.

Consider a hypothetical example. Years after a fund invests in a property, a member dies and their estate questions how the fund was run. A clear trail of dated minutes, valuations and strategy reviews lets the surviving trustee show every major decision was made properly.