The Commissioner of Taxation has concluded, in ATO ID 2015/10, that using a self managed superannuation fund (SMSF) to hold a life insurance policy for the purpose of a buy sell agreement breaches the sole purpose test and the prohibition against providing a member (or a relative) financial assistance.
So does this mean that superannuation funds cannot be used to hold insurance in buy-sell arrangements? Not necessarily. The position of the Commissioner would appear not to apply to insurance held in public offer superannuation funds and potentially does not apply to SMSFs that don’t have any formal buy sell arrangements.