The legislative framework of electronic signatures is confusing – to say the least.
Legislative Framework of Electronic Signatures
This episode goes back to our mini-series about electronic signatures.
We started in episode 386 when we discussed the system of agreement any signature sits in. No signature floats all by itself in space. Any signature sits within a system of agreement.
In this episode 392, let’s talk about the legislative framework of electronic signatures with Jennifer Lauchlan and Marcus Hannah of Docusign in Australia. First at the federal level, and then for each of the states and territories in Australia. What can you sign electronically and what not? How does this differ from state to state?
In the next episode 393, we wrap up the last outstanding questions.
Here is what we learned but please listen in as Jennifer Lauchlan and Marcus Hannah explain all this much better than we ever could.
To listen while you drive, walk or work, just access the episode through a free podcast app on your mobile phone.
Legislative Framework of Electronic Signatures
The legislative framework of electronic signatures is so confusing since you have so many different legislations having a say.
You have federal law. Then you have state law for each of the eight states and territories. And then you have a long list of other legislations like the Corporations Act, the Income Tax Assessment Acts and many more which also regulate what you can and can’t sign electronically.
But when you look at all this, it all starts with the Electronic Transactions Act. The so-called ETA.
Electronic Transactions Act
The Electronic Transactions Act 1999 plays a big role in your accounting practice, even though you most likely have never heard of it.
This Act says that you can electronically sign any document anywhere in Australia unless there is a specific federal or state law that says you can’t.
There is a Federal ETA. And then there are State ETA’s.
Generally speaking, federal law covers things like companies signing under the corporations act and state law covers individuals signing.
Federal ETA
The Federal ETA was also recently amended to remove a number of exclusions so you can sign more electronically than ever before. A lot of those exclusions were a bit obscure so not really relevant to list here and there are still a few exclusions to the ETA that remain like the Superannuation Industry (Supervision) Act. However, there are also exclusions to the exclusions and maybe most relevant to those listening today is that in July 2020 the Electronic Transactions Regulations 2020 were updated to specifically confirmed that SMSF financial statements can be signed electronically and accepted by the ATO (Electronic signatures for SMSFs – Compliant and Accepted by the ATO)
So if there was just the ETA and nothing else. Life would be so easy.
Corporations Act
s127 Corporations Act just applies to companies, so not individuals, not trusts or partnerships, not charities and not government agencies. So we need more.
In February 2022, the amendments to the Corporations Act enabled companies to sign under it. This amendment specifically permits the electronic signing of Deeds without the need for witnessing, which is a significant development that allows for the electronic signing of a large number of documents. However, if a Deed requires signing under seal, witnessing is necessary, which can also be done electronically with an audio-visual link. Currently, the Corporations Act is under consultation again, and it is proposed to make it explicit regarding the inclusion of documents submitted to ASIC.
Harmonisation
We need to harmonize between states and the federal level, requiring one set of legislation that covers all aspects. Initially, electronic signing of most agreements and contracts is already possible. However, specific scenarios and documents still create confusion. Deeds specifically were an area of reform through covid.
Individual Signing
Now moving on to individuals signing. The problem is that each state has its own rules so that causes a lot of confusion. Victoria was a real leader and made their permanent amendments first back in Mar 2021. They amended their ETA to specifically call out that Deeds could be created, signed, sealed and delivered by electronic means and specifically confirmed that deeds did not need to be witnessed. Also provided that for other documents that currently require a witness, this witnessing could be done via audio-visual link. They also specifically amended several other acts including the Oaths and affirmations act, the wills act, the POA Act and the Bails Act which all specify their specific rules around signing electronically.
New South Wales
The lawmakers in NSW had already allowed for electronic deeds, but they had made witnessing mandatory, which created a loophole that was highlighted by the pandemic. It was not possible to witness electronically until the law was amended. Consequently, it is now possible to sign and witness electronic deeds in NSW through an audio-visual link.
Queensland
The lawmakers in QLD have amended the legislation to eliminate the requirement for witnessing deeds signed by individuals. Nevertheless, it is presently impossible to sign wills electronically in QLD, while other documents requiring witnessing can be signed through an audio-visual link.
Western Australia and South Australia
WA is under consultation and their draft is looking like deeds won’t require witnessing albeit this isn’t passed yet. SA is next but not quite there yet.
Jennifer Lauchlan and Marcus Hannah of Docusign in Australia.
So for electronic signatures, you start with the Electronic Transactions Act – the ETA. That is a federal law. And hence it applies to anything governed by federal law.
The ETA says that everything can be signed electronically unless specific legislation says something different.
The three federal legislations we usually deal with as tax agents – the two Income Tax Assessment Acts (ITAA) and the Corporations Act – those three allow electronic signing. So most documents in our firms can get signed electronically.
For example:
Engagement Letters – no problem. All is good under the ETA.
Anything to do with Companies – all good under the Corporations Act 2001.
Anything to do with tax or tax administration, be it Tax returns, BAS, or IAS – all good under the Income Tax Assessment Acts 1997 and 1936 and the Tax Administration Act 1953.
So the federal law documents we usually work with are all good. All can get electronically signed.
But now we come to documents governed by state law. And that’s where the confusion starts because the states all run their own show. Of course, we already know that – think back to the foreign beneficiary rules for trusts, land tax, or stamp duty. So this is no different – every state does this in a slightly different way.
The confusion is not just around what can and can’t be signed electronically when and by whom, but also around what needs a witness or not and -thirdly – what needs a special witness or not.
So looking at the documents we mainly work with under state law – there are trust deeds, power of attorneys, statutory declarations, wills and affidavits. Those five. They are governed by state law. And hence for those five, it gets really confusing because each state law says something different.
Victoria and New South Wales
In Victoria and NSW, you can create and electronically sign all five documents –
- trust deeds
- power of attorneys
- statutory declarations
- wills and
- Affidavits.
And if a document requires witnessing or a special witness, then you can do that through an audio-visual link in Victoria as well as NSW.
Pre-COVID, NSW had forgotten the witnessing. So to witness something in NSW before COVID, you still needed a wet signature, but they have fixed that, so both Victoria and NSW now allow witnessing through an audio-visual link.
What document requires a witness and what requires a special witness is a different kettle of fish. There are still some differences. But let’s put that into the too hard basket for now and rely on lawyers.
Queensland
For most documents, Queensland is the same as Victoria and NSW, but there are exceptions. And two of those exceptions are wills and power of attorney.
Now a small comment on the side – as you know Queensland doesn’t charge stamp duty on trust deeds, while NSW for example does, I think AUD 500. So when we as accountants set up a new trust for a client, we often put the place of settlement into Queensland to avoid this stamp duty.
To achieve that, it is necessary to sign the deed in Queensland.. And you can already see the problem. What if the client and the settlor are not in Queensland?
The common solution – don’t quote me in case I am wrong – but a common solution is that the client wet signs a power of attorney – no witnessing required and the client just keeps the original – and then emails a copy to the provider and then the provider sets up and settles the trust under this power of attorney, and then voila – a place of settlement in Queensland and there is no backwards and forwards for the signing of the power of attorney or trust deed.
And when the client receives the wet-signed trust deed from the provider, they just attach the original wet-signed power of attorney to the deed and all is sorted.
Having everything wet signed, but eliminating the need to send documents back and forth, is indeed a clever approach.
So you really have to muddle your way through and get advice along the way.
Especially when it comes to the rest of Australia – so Western Australia, ACT, Northern Territory, South Australia, and Tasmania, are all up in the air at the moment and about to change.
Electronic Signature
So hopefully this time next year we can talk about electronic signatures in exactly 15 seconds where we just say that all eight states and territories are exactly the same and you can electronically sign everything, and yes these specific documents need witnessing, but you can witness through an audio-visual link anywhere in Australia and yes, these other documents need a special witness but you can also do that through an audio-visual link anywhere you are. And all this is the same wherever you are in Australia. And that took exactly 15 seconds.
That’s how it hopefully will be next year. Let’s hope.
So now this was the legislative framework, not as clear cut as I had hoped, but we are getting closer.
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