Maintain SMSF compliance with the sole purpose test (s 62)
SMSFs must be maintained for the sole purpose of providing retirement benefits.
Who must comply
SMSF trustees.
What triggers it
Operating an SMSF.
When due
Continuous.
Evidence required
Investment strategy, valuation evidence, related-party transaction documentation, collectibles compliance for in-house assets.
Max penalty
Loss of complying status; non-arm's length income taxed at 47%; trustee admin penalties; potential disqualification
Summary
Section 62 of the SIS Act requires SMSFs to be maintained solely for one or more core or ancillary purposes — primarily provision of retirement benefits. Pre-retirement benefits to members, related party transactions outside the rules, and asset use by members (e.g. collectibles, residential property) breach the test.
Enforced by
Source legislation
Entity types
Topics
Related obligations
- CWLTHLodge an annual SMSF audit before lodging the SMSF Annual ReturnSelf-managed super funds must be audited by an ASIC-registered auditor each year.
- CWLTHPay superannuation on every payday (Payday Super)From 1 July 2026, super must reach the employee's fund within 7 business days of each payday.
- CWLTHComply with SIS Act trustee covenantsSuper fund trustees owe statutory covenants of care, skill, diligence, best financial interests, and prudent investment.
- CWLTHAnnual YFYS performance test (MySuper + Choice)APRA annual performance test for MySuper products + (from 2024) Trustee Directed Products.
- CWLTHStronger Member Outcomes — APRA SPS 515RSE licensees must annually assess member-outcomes performance + take action.
- CWLTHMySuper authorisation for default super productsDefault super contributions can only flow to APRA-authorised MySuper products.
Frequently asked questions
- Who must comply with SMSF compliance with the sole purpose test (s 62)?
- SMSF trustees.
- What triggers SMSF compliance with the sole purpose test (s 62)?
- Operating an SMSF.
- When is SMSF compliance with the sole purpose test (s 62) due?
- Continuous.
- What is the maximum penalty for SMSF compliance with the sole purpose test (s 62)?
- Loss of complying status; non-arm's length income taxed at 47%; trustee admin penalties; potential disqualification
- What evidence is required for SMSF compliance with the sole purpose test (s 62)?
- Investment strategy, valuation evidence, related-party transaction documentation, collectibles compliance for in-house assets.
Source: https://ato.gov.au/individuals-and-families/super-for-individuals-and-families/self-managed-super-funds-smsf/managing-your-fund/sole-purpose-test. Rules Mate is not a law firm. Always verify against the live regulator source before acting.