To recap
The Bendel case concerned whether a private company's failure to call for payment of entitlements to income of an associated trust was the provision of 'financial accommodation' and, therefore, a loan for Division 7A purposes.
An update on the Australian Taxation Offices (ATO) position
The ATO has published a Decision Impact Statement (DIS) on 19 March 2025 outlining their position on the Bendel decision.
It is stated in the DIS that until the appeal process is finalised, the ATO do not intend to revise the current views relating to private company entitlements to trust income. That is to say, they will continue to apply their views as published in Tax Determination TD 2022/11. Further, it is stated that if a decision is required to be made by the ATO before the appeal process is finalised, the ATO’s decisions will be based on the existing ATO view of the law.
As the ATO has now filed an application to the High Court, the public must wait for the outcome of the appeal in order to clarify the final position at law as to whether a UPE is not a loan.
What does this mean for you?
If you have entered into a Division 7A agreement from your family trust to a company and would like to ensure it is complying and/or wish to discuss the 2025 distribution from a trust and prior to year end, or any other tax advice on your mind, please contact Charles Yuan at cyuan@prosperity.com.au or your principal adviser at Prosperity.