Sole Purpose Test

The Sole Purpose Test is designed to ensure that each investment made or action undertaken by the SMSF is for the sole purpose of providing retirement benefits or death benefits to the Beneficiaries of the SMSF.

It is important that the sole purpose test is adhered to at all times. If Trustees use the SMSF for any other purposes, e.g. to access funds before retirement or to run a business in the SMSF, the Fund may forfeit its compliance status. This means the Fund will no longer be taxed at the concessional rate of 15% but at a much higher rate, with added penalties. So stay within the Superannuation rules!

In its capacity as regulator of SMSF’s, the ATO does not take a big stick approach to applying these rules and regulations. As long as the Trustees have a genuine interest in the retirement benefits of the Fund at heart, there won’t be any penalties.

Trustees must maintain an SMSF in a manner that complies at all times with the sole purpose test. This is the most important rule of Superannuation.

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