Background

The Bendel case has attracted significant attention in the tax community. It concerns whether unpaid present entitlements (UPEs) owed by trusts to private companies can be treated as loans under Division 7A of the Income Tax Assessment Act 1936.

The Full Federal Court previously rejected the Commissioner of Taxation’s appeal against an earlier Administrative Appeals Tribunal (AAT) decision. In doing so, the Court made it clear that an obligation to repay was required under section 109D, not simply an obligation to pay.

What’s Changed

On 13 August 2025, the ATO updated its interim Decision Impact Statement to note that the High Court has now granted special leave for the Commissioner to appeal the Full Federal Court’s decision.

Until the High Court process is finalised:

• The ATO will continue to apply its existing view of the law as set out in Taxation Determination TD 2022/11.
• Objection decisions relating to past year assessments will generally not be finalised, unless a taxpayer specifically requires one.

What This Means for You

For now, there is no immediate change to the ATO’s administration of Division 7A in relation to UPEs. However, the High Court’s decision could have far-reaching implications for how unpaid trust entitlements are treated for tax purposes.

It’s also worth noting that the way private company beneficiaries deal with UPEs may have implications under other provisions, such as section 100A of the Income Tax Assessment Act 1936.

Next Steps

We are monitoring the High Court appeal closely and will keep clients updated as developments occur.

If you operate through a trust or have private company beneficiaries, now is a good time to review your arrangements and consider whether there could be future impacts.

👉 Contact us to discuss your specific circumstances and ensure you are well-prepared.