The recent decision of Aussiegolfa v FCT is an important decision for considering two aspects of the superannuation laws that are not often considered by the Courts, the in-house asset rules and the sole purpose test. This snippet looks at the latter, another snippet looks at the former.
Here, the relevant self managed superannuation fund (SMSF) invested in a managed investment scheme under which the SMSF directed the responsible entity of the scheme to acquire a residential property. The net income and proceeds of the residential property would be held for that SMSF to the exclusion of the other investors in that scheme. An additional issue here, for the SMSF in question, was that the residential property was leased to the daughter of the member of the SMSF.
The Court confirmed the strict nature of the sole purpose test and that a “high standard was adopted by [the sole purpose test] as an important pillar to ensure that [SMSFs] achieve the objectives of providing retirement benefits and not current day use or benefits”. Here, the collateral purpose of providing housing for a relative was found to be “inconsistent with the underlying objective of not providing present benefit or use to members of a [SMSF] or to relatives of the members” and therefore caused the SMSF trustee to breach the sole purpose test.
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