The question as to back dating documents illegality is touched on in the following Case Study provided to us by professional colleagues at Cornwalls Law (back in 2011, while they then practised as McKays Solicitors). The Case Study makes it clear that back dating documents is probably never a good idea, regardless of how expedient it might seem at the time. Following is their ‘warning’ to those who might be tempted into back dating documents…
In a case we currently have (had at the time of this article being posted), one of our clients was a director of a corporate trustee for his late father’s self-managed superannuation fund.
Non-compliant fund
Years before our client’s father died, he had the super fund buy what in reality was a principal place of residence for himself and his defacto wife. (ContinuumFP Note: as will become obvious from the rest of this fact summary, such an asset holding/ use, renders a superannuation fund non-compliant. This is so, on a couple of grounds, that we would be happy to discuss with you at your convenience, or in response to a Comment on this post.)
The accountants for the estate and ourselves have advised the client of the consequences of the fund not being compliant, including significant, adverse financial consequences. Recently, our client became eager to explore other options and consulted another superannuation adviser.
The second adviser suggested that as the returns had not been filed for the super fund for many years or for the estate (because the accountant who had the engagement to prepare and lodge those documents had not been paid), the problems could all be overcome by transferring the house from the super fund to the estate now and documenting it as if it happened years ago.
Naturally we advised our client that he could not do this and that the estate’s accountants and the superfund’s auditors would have anything to do with it either.
With that background in place as a salutary reminder to trustees and advisers in a very rapidly growing field, our lawyer colleagues go on with some Case Law to highlight the illegality of back dating documents.
This incident reminded me of a case a few years ago called R v Meares. Mr Meares owned shopping centres and oddly enough complained to his accountant that he was paying too much tax. His accountant, Mr Chesterton, advised him he could partially solve his tax problems by entering into a “management agreement” with a non related party under which the non related party provided management services to Mr Meares.
Backdated by two years
The agreement was signed and back dated by two years.
Then, Mr Meares paid the “management fees” to the third party and claimed the payments as a deduction. The third party kept a small proportion of the management fees and returned the balance to Mr Meares as a “loan”.
Both Meares and Chesterton were charged and convicted.
Whilst Meares went to jail Chesterton got off fairly lightly and escaped actually serving time because he helped the authorities (by dobbing in his client) and put in a very early plea of guilty.
Recognising illegal conduct
Much of the time it is easy to recognise illegal conduct but sometimes it is not quite so clear. As professionals, we all need to remember that our reputation and integrity is the most valuable asset we have.
So, if you ever have any doubt about the legality of a transaction, seek legal advice right at the outset.
If you have any questions or would like assistance, please contact Ian Heathwood at McKays Solicitors (now practising as Cornwalls Law).
Continuum Financial Planners Pty Ltd thank McKays Solicitors (now practising as Cornwalls Law) for allowing us to reproduce this article. The article was originally posted in May, 2011 and has been refreshed and updated in June 2020.
