If you control a family trust that distributes to a private company the Full Federal Court Ruling in the Bendel Case could impact you.
The Full Federal Court has ruled in the Bendel case, finding that an unpaid present entitlement (UPE) owing by a trust to a corporate beneficiary is not a loan. This decision contradicts the ATO’s long-standing position that such UPEs give rise to deemed dividends under Division 7A.
What do you need to know about the Full Federal Court Ruling in the Bendel Case?
The court confirmed that a UPE does not meet the definition of a “loan” under section 109D of Division 7A, as there is no obligation to repay.
This overturns the ATO’s administrative practice dating back to 2010 and has significant implications for private groups using trust structures.
The ATO may still seek leave to appeal to the High Court, or the government could move to amend legislation.
What does the Full Federal Court Ruling in the Bendel Case mean for you?
We are closely monitoring the situation and will provide further updates as they become available.
For our clients, we will discuss any implications for your trust distributions and company loan arrangements as part of our upcoming year-end planning discussions.
If you have any questions in the meantime, please feel free to reach out.
Published March 2025
Damian James, Partner – Specialising in corporate taxation, taxation of complex family groups, financial risk management, and business strategy.