Sole Purpose Test
What Is the Sole Purpose Test in SMSF?
The Sole Purpose Test ensures that a Self-Managed Super Fund (SMSF) is maintained solely to provide retirement benefits to its members. This rule is set by the ATO and is a critical component of SMSF compliance.
Why the Sole Purpose Test Matters
SMSF trustees must ensure every investment and decision supports the core objective of retirement savings. Engaging in activities that provide pre-retirement benefits like using fund assets personally or offering personal advantages to related parties breaches the Sole Purpose Test.
Violations may result in penalties, trustee disqualification, or loss of tax concessions. Therefore, understanding and applying this test is crucial.
Examples of Sole Purpose Test Violations
Using SMSF property for holidays or personal stay
Lending money from the SMSF to family or related entities
Purchasing art or collectibles and displaying them at home
At SMSF Depot, we help ensure that your SMSF investment strategy aligns with the Sole Purpose Test, keeping your fund compliant and tax-effective.
ATO Guidelines and Legal Structure
The Australian Taxation Office (ATO) provides detailed regulations for SMSF. Trustees must follow these rules, supported by a legally sound Trust Deed and a clear Investment Strategy.