29/04/2016

The presumption is that a document is taken to have been signed on the date shown on the document.  Are you doing any harm by backdating the deed you are signing?

1. Breaking news: it’s against the law

If you backdate a deed you are giving the rest of the world a false impression as to when the deed was executed and took effect.  While this may seem harmless, in extreme circumstances in NSW, it could land you in gaol for up to 10 years, because, contrary to some popular belief, backdating is not only not recommended, it is fraudulent and illegal.

Depending on the intention, legislation in Australia makes it a crime for someone to make a false document, and that includes a document that purports to have been made on a date when it was not in fact made.

2. You may do more harm than good

In terms of trusts (such as SMSFs and family trusts), they come into existence only when a person (the trustee) holds an asset (trust property) on trust for someone else (the beneficiary). Not before.  

Yet, we sometimes see trust deeds which are dated, let’s say 1 July 2015, when the corporate trustee was not incorporated until 3 July 2015.  If the trustee was not even in existence on 1 July, how can the trust exist from that date?
 
This not only undermines the integrity and legal existence of the trust, but also creates hurdles that will delay dealings with third parties such as banks and duties offices. It also potentially gives ammunition to a litigious third party seeking to make a claim against the trust.

In NSW, the Office of State Revenue has successfully prosecuted individuals (or their agent) who engaged in criminal behaviour to evade their tax obligations by deliberately providing false and misleading information (eg, backdated documents).   

Backdated documents are also likely to raise red flags with the ATO as a sign of possible fraud.

3. Think about the consequences

If you’re being asked to backdate documents, be aware that you may be putting yourself at risk of breaking the law to make up for someone else’s lack of planning.  More relevantly in the context of SMSFs, individuals who have been convicted of an offence involving dishonest conduct are disqualified persons, thereby preventing them from ever being a trustee (or member) of an SMSF or, if they are already acting as such, forcing them to immediately resign and exit the SMSF.  

The disqualification will be a public matter as any third party searching the name of a person who has been disqualified may stumble across the ATO’s announcement in the government Gazette that this person is not a ‘fit and proper person’ to manage an SMSF.  Not a good look!

As for those professional advisers who have been doing the backdating, their dishonest conduct not only puts them at risk of losing clients, but may also result in a loss of licence and/or criminal sanctions.

4. Solution

If the parties have agreed that the deed should be effective from a date earlier than when they actually sign the document, and the facts surrounding that earlier date line up, this should be communicated to the drafter of the deed as they may be able to reflect this retrospective arrangement in the drafting.