What is an Electronic Signature
Electronic signatures are governed by the common law as well as the Electronic Transactions Act 1999 (Cth). States and territories have their own Electronic Transactions Acts which may apply to their respective laws.
For SMSFs, the reliability of electronically signed documents can also be relevant during the annual SMSF audit, where trustees may need to support the authenticity and timing of signed records.
Under section 10 of ETA 1999, an electronic signature is valid if the following conditions are met:
(a) Identity: A method is used to identify the person and to indicate the person’s intention in respect of the information communicated
(b) Reliability: The method is as reliable as appropriate for the purpose and proven to have fulfilled the functions in (a)
(c) & (d) Consent: The method is acceptable for the entity/person requiring the signature
In the European Union, the regulation establishes three different types of electronic signatures:
- Simple electronic signature: it does not allow to identify the signer in a unique way
- Advanced electronic signature: it allows to identify the signer in a unique way
- Qualified electronic signature: It allows to identify the signed in a unique way, and it’s necessary to have a qualified electronic signature certificate and a qualified signature creation device.
An advanced electronic signature is considered legally binding, and it must meet the following requirements:
- The signatory can be uniquely identified and linked to the signature
- The signatory must have sole control of the signature creation data (typically a private key) that was used to create the electronic signature
- The signature must be capable of identifying if its accompanying data has been tampered with after the message was signed
- In the event that the accompanying data has been changed, the signature must be invalidated
In the ETA 1999 above, we don’t require sole control of the signature creation data. Our definition is not as prescriptive. Some electronic service providers allow shared email address between SMSF trustees, or one trustee to sign on behalf of the other. I would say it’s does not pass the reliability and appropriateness tests. “As reliable as appropriate” potentially can open a debate.
A qualified electronic signature can be considered as a digital equivalent to a handwritten signature and can’t be easily challenged in court. A qualified electronic signature provider must be granted qualified status by a supervisory government body. In Australia, we don’t have a government endorsed list of certified electronic signature entities.
Before any document is e-signed, it’s important to evaluate the features and setup of the e-signature platform. This includes how the signer is identified and whether that method is sufficiently reliable for its intended purpose — particularly from an SMSF audit perspective, where the auditor must be able to verify identity, intent and the integrity of the document. Not all providers in the market offer a level of reliability that would support a valid outcome.
It is also worth considering whether electronic execution is appropriate in the circumstances. For example, some SMSF law firms recommend that certain documents, such as deeds, are not executed electronically, even where it may be legally permissible. There is a distinction between technical compliance and best practice.
Documents Can and Cannot be E-signed
Both SIS and Corporation Act are exempt under ETA. An exemption is when the ETA does not apply to a process under Commonwealth law, such as a requirement to make a signature, or send written information.
On 29 July 2020, the Electronic Transactions Regulation (Cth) 2020 was passed and replaced the Electronic Transactions Regulations (Cth) 2000. In the ETR, section 35B of the SIS Act is excluded from the exemptions. The effect is that the financial statements can be e-signed.
In February 2022, Corporations Act 2001 was amended to allow a document (including a deed) under section 127 (execution of documents by a company) to be signed by electronic means. An establishment deed with corporate trustee can be signed by electronic signatures, however witnessing requirements are set down state by state.
Deed and constitution may set out ways in which a document may be executed or signed.
Member applications and trustee minutes may be signed electronically, provided the deed permits it.
We accept electronic signatures for our engagement letters, trustee rep letters, member confirmations and certain trustee declarations.
However, Consent to act as trustee and the ATO trustee declaration can’t be e-signed, as they are under SIS Act and are exempt from ETA.