The legislation defining the sole purpose test will not need to be amended despite the announcement in the 2017 federal budget that will allow superannuation to be used to assist first home buyers, according to a senior technical professional in the industry.
“There is a discretionary power in there for the commissioner to allow payments to be made in other circumstances. It’s why you’ve got [conditions of release on] compassionate grounds and hardship grounds,” SuperConcepts SMSF technical and private wealth executive manager Graeme Colley said.
“They don’t fit under the core purposes or the ancillary purposes [of the sole purpose test]. They’re just another item as approved by the commissioner, so they’ll just add that onto it.”
Colley noted other examples where amounts from super could be released without breaching the sole purpose test.
“It’s a bit like the release of benefits for excess concessional contributions and things like that. They fall under those sorts of provisions,” he said.
He said recent times had seen more items like this added to the commissioner’s discretionary powers.
The First Home Super Saver Scheme was introduced as part of the 2017 budget, allowing individuals to salary sacrifice up to $30,000 to help them purchase their first primary residence.
Details on how the scheme will work in practice remain unclear, with concerns over how the amount set aside for this purpose will be released in time to facilitate the purchase of a property.
Many industry participants have questioned how successful the initiative might be, with speculation the majority of super funds may baulk at the opportunity to offer the facility to members given earnings on these monies will be deemed to have generated a return of 4.78 per cent a year.
Other commentators have questioned whether SMSFs are an appropriate structure to participate in the scheme as it would mean admitting adult children into the fund, which could expose retirement assets to actions such as divorce proceedings.
