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MoniFergs(Newbie)Newbie
10 Oct 2024

Hi ATO community,


I have 2 questions regarding the Sole Purpose Test when deduction financial adviser fees through super funds.


1) A person who is 60 yo, ceases his only full time job

  • The adviser recommends the client commence an account-based pension to draw an ongoing income (super/pension advice).
  • The adviser also makes some recommendations on the client’s cashflow and loan repayment situation.
  • The Adviser Service Fees are charged within the client’s super fund.

Does the above meet the sole purpose test? As all advice fees are charged via the super fund, however the client has met a condition of release.


2) A person who is 60yo, has two employment arrangements and he resigns from one job.

  • The client over age 60.
  • Receives a regular monthly salary from a family Discretionary Trust for administrative work in the family business and also works 4 days a week for an unrelated company, ABC Pty Ltd.
  • The client ceases employment with ABC Pty Ltd, however, continues working for the family business.
  • After resigning from one position but continuing with the other, the adviser recommends that the client stop salary sacrifice contributions to super due to reduced income.
  • Cashflow and mortgage repayment advice are also provided.
  • Advice fee is charged to the super fund.

Does the above meet the sole purpose test? As all advice fees are charged via the super fund, however the client has met a condition of release.

1,020 views
3 replies
1,020 views
3 replies

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Most helpful reply

Bruce4Tax(Taxicorn)Taxicorn
10 Oct 2024

  1. Does the above meet the sole purpose test? Not if fees include any advice to the member that is not relevant to the SMSF - some say the advice should be for the trustees, not the member.
  2. Does the above meet the sole purpose test? No - see above

SMSF should not be paying for:


The adviser recommends the client commence an account-based pension to draw an ongoing income (super/pension advice) - member advice, not SMSF advice


The adviser also makes some recommendations on the client’s cashflow and loan repayment situation - not SMSF issue


After resigning from one position but continuing with the other, the adviser recommends that the client stop salary sacrifice contributions to super due to reduced income - member advice, not SMSF advice


Cashflow and mortgage repayment advice are also provided - not SMSF issue


Financial advice for SMSF would be about investments, SMSF taxation, etc.



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Most helpful reply

Bruce4Tax(Taxicorn)Taxicorn
10 Oct 2024

  1. Does the above meet the sole purpose test? Not if fees include any advice to the member that is not relevant to the SMSF - some say the advice should be for the trustees, not the member.
  2. Does the above meet the sole purpose test? No - see above

SMSF should not be paying for:


The adviser recommends the client commence an account-based pension to draw an ongoing income (super/pension advice) - member advice, not SMSF advice


The adviser also makes some recommendations on the client’s cashflow and loan repayment situation - not SMSF issue


After resigning from one position but continuing with the other, the adviser recommends that the client stop salary sacrifice contributions to super due to reduced income - member advice, not SMSF advice


Cashflow and mortgage repayment advice are also provided - not SMSF issue


Financial advice for SMSF would be about investments, SMSF taxation, etc.



MoniFergs(Newbie)Newbie
6 Nov 2024

Thank you for replying @Bruce4Tax.


I am still a little confused, my understanding is Sole Purpose test is to ensure "the fund needs to be maintained for the sole purpose of providing retirement benefits to members, or to their dependants if a member dies before retirement". It does not specify advice to members vs advice to trustees.


In the above example 1, the member is fully retired, a condition of release is met. So by providing cashflow/loan repayment advice after retirement is for the benefit of the member's retirement. Is it not? If the answer is no, then does this mean at no point even after a member fully retires, the adviser fee cannot be charged via the SMSF if its not addressed to the trustee.


Thank you for clarifying.




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