Fail the sole purpose test and you could end up in court.

Two recent court cases have highlighted the determination of the Australian Securities and Investment Commission (ASIC) to crack down on the sole purpose test for self managed superannuation funds (SMSFs). Both cases are being prosecuted by the Commonwealth Director of Prosecutions.

Under the Superannuation Industry (Supervision) Act (SIS Act), SMSF trustees must operate their fund for the sole purpose of providing retirement savings for the fund's members.

The two cases involve millions of dollars of the preserved benefits of hundreds of superannuants.

The first criminal charge to be laid against a trustee of a SMSF under the SIS Act was made against Mr Atan Ona Kassongo from New South Wales in August 2008 for dishonestly failing to ensure a SMSF was maintained in accordance with the sole purpose test.

ASIC alleges that the preserved superannuation benefits of 192 superannuants totalling $4,055,043 were deposited into the bank accounts of the Kassongo Superannuation Fund (KSF) and rolled over into 56 complying superannuation funds. Mr Kassongo was trustee of the KSF at the time.

ASIC alleged that he then used the KSF to obtain early access to these benefits by withdrawing and distributing the funds to the superannuants and agents engaged by him to assist in the early release scheme. Mr Kassongo retained over $600,000 for himself by way of commission.

He pleaded guilty in September 2008 and is to be sentenced...

In November 2008, ASIC brought the same charges against Gerard Little, a SMSF trustee, for failing to ensure his SMSF, called Little Super Fund (LSF), was maintained in a manner that satisfied the sole purpose test.

ASIC alleges that Mr Little as trustee of LSF accepted the preserved benefits of 121 superannuants worth $3.5 million into the bank account of the fund.

These monies were then rolled over into 11 other complying superannuation funds. Mr Little used these funds illegally, withdrawing a portion for himself totalling $685,000, and distributing the rest among the original superannuants.

ASIC alleges that Mr Little knew the rolled over super benefits had to be preserved until retirement age but had no intention of abiding by these rules.