To meet the sole purpose test your fund needs to be maintained for the sole purpose of providing retirement benefits to your members, or to their dependants if a member dies before retirement. This means that every investment and management decision trustees make must be for this purpose.

Your fund may not meet the sole purpose test if you or anyone else, directly, or indirectly, obtains a present day, non-retirement benefit when making investments, for example:

• if you receive a commission or personal reward when investing your fund’s assets in a particular investment group
• if the fund invests in collectables such as art or wine, and a trustee or member displays, has access to, or stores these assets in their private residence
• if the asset provides a pre-retirement benefit to someone, such as using a fund asset by taking a family holiday rent free in an SMSF investment property.

A contravention will occur if your investments do not meet the sole purpose test.

Failing to meet the sole purpose test is very serious. In addition to the fund losing its concessional tax treatment, trustees could be disqualified and face civil and criminal penalties.