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Dec 28, 2023

COS signature requirements

in SMSF Technical Forum

Dear Coleagues,

The Trustee of the Bare trust has five directors.

COS is signed by two directors.

Should we need COS signed by all five directors?

1 comment

Comments (1)

The Auditors Institute Ltd

Jan 08, 2024

It is assumed that reference to "the Trustee of the Bare trust" in this question is a reference to a custodian entity holding legal title to an asset that was funded using a borrowing that is compliant with section 67A of the SIS Act.

If that is the case, the relevant financial statements and other documents, likely require the signing of at least two of the five directors.

Any income generated in relation to an asset acquired using an LRBA should be recorded as income of the SMSF. In practice, most bare trustee companies do not transact on their on behalf.

If the reference in the question is to the trustees (and members) of the SMSF, it is noted that section 35B of the SIS Act reads as follows:

Accounts and statements

(1) Each trustee of a superannuation entity that is a self managed superannuation fund must, in respect of each year of income of the fund, ensure that the following accounts and statements are prepared in respect of the entity:

(a) except where the regulations provide that this paragraph does not apply--a statement of financial position;

(b) except where the regulations provide that this paragraph does not apply--an operating statement;

(c) the accounts and statements specified in the regulations.

(2) The regulations may provide for or in relation to the preparation of accounts and statements covered by subsection (1). If the regulations do so, the accounts and statements covered by subsection (1) must be prepared in accordance with the regulations.

(3) The accounts and statements prepared in accordance with subsection (1) must be signed as follows:

(a) if there is a single corporate trustee--by:

(i) if the corporate trustee has one or 2 directors--each director; or

(ii) otherwise--at least half of the directors; or

(b) if there is a group of individual trustees--by:

(i) if there are only 2 trustees--both trustees; or

(ii) otherwise--at least half of the trustees.

Accordingly, if a corporate trustee has five directors, the financial statements should be signed by at least three of the five directors (being "at least half of the directors" as per section 35B(3(a)(ii)).

That said, I am aware of some SMSF auditors who insist that all of the directors of the corporate trustee sign the financial statements before they commence the audit.

It would be interesting to hear the views of other auditors in relation to this matter.

Edited