As SMSF balances grow one of the common things we see here at GMD Accounting is clients considering the purchase of property, whether residential or commercial, in their fund. One of the key tests that we ensure they consider when evaluating whether or not to purchase a property, is the Sole Purpose Test.

The Sole Purpose Test is a test that ensures a superannuation fund is maintained for the purpose of providing benefits to its members upon their retirement (or attainment of a certain age), or their beneficiaries if a member dies. If an SMSF trustee, an SMSF member or relative enjoys a direct or indirect benefit before retirement from a SMSF investment, that is, more than an incidental or insignificant benefit, it is probable that  the Sole Purpose Test has been breached.

Below is a short clip with an easy-to-follow example of what the Sole Purpose Test is and how it governs the investments an SMSF can undertake. Should you have any questions regarding SMSFs or the Sole Purpose Test contact your GMD Accounting team member.