APRA provides some answers on the Sole Purpose Test

AFA News 5 August 2021. We have previously reported on discussions at the 2 June 2021 Senate Estimates hearing on the lack of progress with a review by APRA of the Sole Purpose Test guidance.  We also released a paper on 7 July 2021 to highlight some feedback from APRA on the Sole Purpose Test, which was included in their joint letter to super fund trustees that was issued on 30 June 2021.

APRA has also recently provided a response to some Questions on Notice from Senator Slade Brockman, as part of the Senate Estimates process, that were issued this week.  Senator Brockman asked APRA about the following:

  • Does the Sole Purpose Test apply in the case of a pension client, where they have already met a condition of release?
  • Is advice on reducing expenditure to enable a member to salary sacrifice into super, compliant with the Sole Purpose test?
  • Where someone is due to receive an inheritance, and they want advice on what to do with their inheritance and the advice is to put some of the money into superannuation, then does this comply with the Sole Purpose Test?

The response from APRA was short and blunt, suggesting that the Sole Purpose Test does still apply, even where the client is in pension phase and suggested that the salary sacrifice and inheritance advice would both be likely to be inconsistent with the Sole Purpose Test.  APRA has confirmed that they will recommence their review of the Sole Purpose Test and we hope that they will consult with the financial advice profession as part of this review.

For any questions on the Sole Purpose Test, please email policy@afa.asn.au

Issued 05.08.2021. AFA Policy & Education Update