Skiing in Switzerland and SMSFs

I have long thought that required reading for new SMSF trustees should be a summary of the decision in the "Swiss Chalet Case", given by the Administrative Appeals Tribunal some 13 years ago.

The case provides an excellent illustration of what the centrepiece of superannuation - the sole purpose test - is all about.

I was reminded of the significance of the Swiss Chalet Case for super fund members by the cover story in the July issue of Superfunds magazine, published by the Association of Superannuation Funds of Australia (ASFA).

As the feature by journalist Michael Laurence explains, the assets of the super fund involved in the case included: shares through a private company in a golf club operator that, in turn, conferred access to club facilities; units in a family trust with its sole asset being the now-notorious Swiss chalet; and a holiday cottage in Sorrento, Victoria.

In short, a fund member, his family and his friends were the main users of the golf club access, the chalet and holiday house for their personal purposes.

And the tribunal, not surprising, held that the fund was not maintained for the sole purpose of providing retirement benefits, as required under the sole purpose test.

All regulated super funds - whether the smallest SMSF or the largest public-offer fund - must be maintained for the core purposes of providing member retirement and death benefits - not to provide personal benefits along the way.

As the Superfunds article notes, the Swiss Chalet Case did not actually involve a self-managed fund but one established for the employees of a fast-food chain.

Interestingly, assistant commissioner for superannuation Stuart Forsyth is quoted by Superfunds as saying that one of the first things that SMSF trustees sometimes ask him is: "If I put my holiday home in my SMSF, can I use it myself?"

Many trustees simply don't get what the sole purpose test and the aim of having super savings are all about.

The article in Superfunds, headed Not Quite the Same, looks at the regulation of the sole purpose test in the context of SMSFs. It can be ordered from ASFA's website: