What does the High Court’s Bendel decision mean for private groups, trusts and corporate beneficiaries?

For many years, the ATO maintained that certain unpaid present entitlements, or UPEs, owing from trusts to corporate beneficiaries could be treated as loans under Division 7A. That position created significant tax risk for private groups using discretionary trusts and bucket companies.

In this episode of Explain That by Velocity Legal, Andrew Henshaw is joined by Archana Manapakkam to discuss Division 7A, unpaid present entitlements, the Bendel litigation, and why the High Court’s decision matters for trust distribution planning and ATO engagement.

The discussion covers:

• what Division 7A is designed to address;
• how UPEs commonly arise in private group trust structures;
• why the ATO’s long-standing position created deemed dividend risk;
• the Full Federal Court’s decision in favour of the taxpayer;
• the High Court’s decision in Commissioner of Taxation v Bendel;
• why a UPE is not automatically a Division 7A loan;
• the practical uncertainty for historical trust arrangements;
• why Subdivision EA and section 100A may still need to be considered; and
• what taxpayers and advisers should review after Bendel.

A practical discussion for private business owners, family groups, accountants, tax advisers and trustees dealing with Division 7A, trust distributions, corporate beneficiaries, UPEs or ATO reviews.

For advice on Division 7A, unpaid present entitlements, trust distributions, corporate beneficiary arrangements or ATO engagement, contact Velocity Legal’s Tax team.