Compliance issues with the Sole Purpose Test
How the Fund Trustees invest their funds can be an important part of meeting the Sole Purpose Test. For example if there is no retirement purpose linked to a fund’s investment in a certain asset, this may contravene this test. If the investment benefits another party (i.e. not the SMSF) this will breach the sole purpose test. Providing financial help to a member or associate is a breach. If a fund is deemed to be running a business, this may also be a breach of the sole purpose test.
Sole Purpose Test
It is an essential requirement for a SMSF that it meets the Sole Purpose Test which requires a fund to be maintained to provide Superannuation benefits on the retirement of the member or benefits to dependants on the death of the member.
Failure to comply with this requirement will cause penalties for the fund and it may lose its complying status, making the fund unable to access the tax concessions available to complying funds.
The sole purpose test has two elements – core and ancillary purposes. A SMSF needs to be maintained for either:
The Core purpose includes the provision of benefits for each member:
An ancillary purpose includes the provision of benefits to members on retrenchment, disability, financial hardship and compassionate grounds.
We are an independent family owned business that has specialised in Self Managed Superannuation (SMSF) for more than 30 years..
Duties of Trustees
The Superannuation Industry (Supervision) Act 1993 (SISA) imposes a number of trust law duties and obligations on Trustees of a SMSF. These have been codified into covenants and require Trustees to:
In addition to the SISA, Trustees have duties and obligations arising under:
In a broad sense, the Trustees’ Duties can be split into 3 main categories:
The Alan Skerritt Consultancy
Windsor Holdings Pty Ltd (ACN 010 018 041 ABN 12 862 040 559)
(Incorporated in Queensland) Trustee
Nothing in this website should be considered personal advice. The information is of a general nature and does not consider your personal needs and objectives or your financial situation.