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The ATO has now released its Decision Impact Statement (DIS) following the High Court’s landmark decision in Commissioner of Taxation v Bendel [2026] HCA 18.
While the Court decision was widely viewed as a win for taxpayers, the DIS confirms what many expected – the ATO is not stepping back from integrity concerns, and in practice, the outcome is more nuanced.
A Quick Recap
The High Court confirmed in the Bendel case that:
- An unpaid present entitlement (UPE) owed by a trust to a corporate beneficiary is not a “loan” for Division 7A purposes
- Simply leaving the entitlement unpaid (i.e. the company does nothing) does not trigger a deemed dividend
This overturns the ATO’s longstanding position (held since 2009) that UPEs could be treated as loans unless placed on complying Division 7A terms.
The ATO’s DIS – Key Messages
The DIS accepts the Court’s decision but makes clear that the practical risk has not disappeared.
1. No automatic Division 7A exposure from UPEs
The ATO accepts:
- A UPE, where the private company beneficiary does nothing in respect of the entitlement, will not be treated as a loan under s109D
- Accordingly, no deemed dividend arises solely from the existence of a UPE
This is a fundamental shift from prior ATO guidance and the ATO has indicated that TD 2022/11 will be withdrawn.
2. Subdivision EA is front and centre
The ATO makes it clear that Subdivision EA remains highly relevant.
Where a trust with a corporate beneficiary UPE pays, lends money to or forgives a debt owed by a shareholder or an associate of a shareholder, Subdivision EA may apply to deem a dividend. Importantly, this can apply even where the underlying UPE itself is not treated as a loan under s109D.
3. Section 100A remains a key integrity risk
The DIS explicitly highlights that where the entitlement arises in connection with an arrangement where another party benefits, Section 100A may apply. This would result in the trustee being taxed at the top marginal rate.
This is consistent with the ATO’s broader post-Guardian compliance stance.
4. The ATO is still reviewing its guidance
The ATO is reviewing existing rulings and guidance on Division 7A and UPEs, and further guidance is expected. The DIS is open for comment until 24 July 2026.
What this means in practice
- New or existing UPEs should not be automatically assumed to require conversion into Division 7A complying loans
- But the treatment will depend on the trust deed, resolutions, accounts and any subsequent dealings with the entitlement.
- If a UPE has already been converted into a complying Division 7A loan or otherwise dealt with in a way that gives rise to a loan, Bendel does not necessarily reverse that outcome.
- There may be opportunities to revisit prior year positions, including amendment requests or objections
Documentation and intent are crucial. The Bendel outcome turned heavily on the terms of the trust deed, the trustee resolutions, the character of the amounts set aside, and the fact that the corporate beneficiary remained passive. The DIS makes clear that future cases will require close attention to the deed, resolutions, accounting records and subsequent dealings.
Expect the ATO to test whether arrangements reflect genuine entitlements and if the company has real control or benefit.
Final thoughts
The Bendel decision is a technical win for taxpayers, but the ATO’s DIS confirms this is not a free pass. The focus has shifted from whether a UPE is technically a loan to how those funds are actually used in practice.
For most private groups, the practical risk profile hasn’t disappeared. If anything, Bendel is likely to increase ATO scrutiny of trust structures, as the Commissioner pivots to alternative integrity provisions. The importance of getting the commercial substance right is key.
Date: 3/07/2026
The Macro Group Limited AFSL:485843 Tax Agent Number 24 76 5236.
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