Sole purpose guidance needed following recent fund offers

Under the offer, members joining the fund for the first time and contributing at least $350 within the first six months would receive the points.

SuperConcepts chief executive Adrian Urquhart said that, with inducements and deals from APRA-regulated funds gaining momentum, the circumstances under which a fund is permitted to offer inducements with a quantifiable financial value to attract new members needs to be clarified further, especially where they are funded by existing members.

“There is also the issue of members receiving a personal benefit from the assets of a fund before retirement, which arguably is not an incidental benefit because it has influenced the trustee’s decision to enter into the arrangement,” Mr Urquhart said in an online opinion piece.

“We are not saying a breach of the sole purpose has or is occurring, but we do believe clarification is needed for where the line can be drawn.”

If an SMSF firm was to offer shopper points or other similar incentives to individuals who set up an SMSF and have it administered by that firm, Mr Urquhart noted that it wouldn’t take long for regulators to intervene and refer them to section 62 of the SIS Act.

“Over the years, we have seen many examples of SMSFs breaching the sole purpose test because a member or related party has received a personal benefit from the fund assets before retirement,” he said.

Back in 2002, APRA and the ATO issued a media release confirming that the investment of superannuation fund monies in schemes that offer non-superannuation shareholder benefits is inconsistent with the sole purpose test, he noted.

The guidance was issued after trustees invested superannuation monies in Coles Myer Limited Discount Card shares.

“Given the emergence of new similar arrangements, the SMSF sector needs to know whether this position has changed, and, if not, under what circumstances can a fund offer a financial inducement to attract new members?” he said.

“The issue goes beyond the sole purpose test. The SMSF sector also needs to understand how this kind of inducement marketing works in relation to the royal commission’s anti-hawking recommendation.”

Mr Urquhart said that SMSF professionals have been asking for further guidance on what is now considered to be appropriate and enforceable in order to avoid breaches and ensure a level playing field.

“We’re hearing very real concerns that if everyone in the industry isn’t on a level playing field, then the superannuation sector could become unbalanced with unforeseen consequences. That’s not good in a superannuation sector set up for fairness and equity to all Australian retirees,” he said.