The sole purpose test means that each investment made or action undertaken by the SMSF must be for the purpose of providing a retirement benefit 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 purpose, e.g. to access funds before retirement or run a business in the SMSF, the Fund may loose its compliance status. This means the Fund will not be taxed at the concessional rate of 15% but will be taxed at higher tax rates. Plus penalties. So stay within the rules of Superannuation!!!

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

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