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Key highlights from Commissioner of Taxation v Bendel [2026] HCA 18
- In its decision of 10 June 2026, the High Court dismissed the Commissioner's appeal by majority and confirmed that a corporate beneficiary's unpaid present entitlement (UPE) to trust income, is not, merely because it remains unpaid, a loan to the trustee for Division 7A purposes.
- The majority’s analysis turns on the difference between passive non-payment and an actual dealing between the parties. A corporate beneficiary that merely leaves the entitlement unpaid, has not, on that basis alone, provided credit, financial accommodation or any other loan-like benefit to the
trustee. - The decision is squarely contrary to the long-standing ATO position reflected in Taxation Ruling TR 2010/3 and continued in Tax Determination TD 2022/11, which treated a UPE as financial accommodation and therefore a Division 7A loan. That position can no longer be sustained.
- For private groups, the decision is helpful, but it is not a broad immunity. It removes the automatic Division 7A consequence which the ATO had attached to many UPEs, but it does not remove the need to understand precisely what the deed, resolutions and subsequent use of funds have actually done.
- The decision closes one pathway to a deemed dividend, but it does not close Division 7A. In particular, Subdivision EA (loans from trusts while the UPE exists) remains relevant as do other provisions outside of Division 7A, including the ATO’s current focus on s 100A (reimbursement agreements) as well as the broader Part IVA (general anti-avoidance rules). These provisions now matter most where a UPE exists and value has in substance moved to a shareholder or associate.
- The immediate task is not simply to unwind historical arrangements. It is to review the relevant years, the trust deed mechanics, the resolutions, any sub-trust or loan documentation, and the actual flow of funds, before deciding whether any amendment, objection or restructuring step is available or desirable.
Background and context: Division 7A treatment of UPEs
Division 7A treats certain payments, loans and forgiven debts by a private company to a shareholder or associate as deemed unfranked dividends, to prevent the tax-free extraction of company profits. For loans, the legislation deems a dividend where a private company "makes a loan" that is not repaid before the lodgement day.
‘Loan’ is defined inclusively within the legislation to extend beyond its ordinary meaning to:
- an advance of money
- a provision of credit or any other form of financial accommodation
- a payment subject to an express or implied obligation to repay
- a transaction which in substance effects a loan of money.
The contentious question has been the Division 7A treatment of UPEs: amounts of trust income to which a corporate beneficiary is presently entitled but which the trustee has not paid. Since TR 2010/3, the Commissioner has maintained that where a corporate beneficiary knows of and allows the trustee's continued use of its UPE, the beneficiary provides "financial accommodation" and thereby makes a loan under Division 7A. That view underpinned the sub-trust framework in the ATO’s practical compliance guidance and a generation of trust distribution and Division 7A compliance strategies.
The Bendel case
The case arose out of the Steven Bendel 2005 Discretionary Trust. The corporate trustee, Gleewin Pty
Ltd (Gleewin), resolved over a number of income years to "set aside" defined percentages of trust income for the benefit of one or each of the corporate beneficiary Gleewin Investments Pty Ltd (Gleewin Investments) and Mr Bendel. Through Mr Bendel, each party had knowledge of the affairs of the other.
The trust deed provided that amounts set aside ceased to form part of the trust fund and were to be held "on a separate trust ... pending payment" (cl 3(5)). Gleewin Investments did not call for payment at any relevant time; much of its entitlement to income was lent by the trustee to Mr Bendel, which explains why the interaction with Subdivision EA remains important.
The Commissioner assessed on the basis that its unpaid entitlements were loans to the trustee for Division 7A purposes. The AAT set the assessments aside, finding that a UPE was not a “loan” for Division 7A purposes. The Full Federal Court dismissed the Commissioner's appeal, holding that a “loan” for Division 7A purpose requires more than a mere obligation to pay: it requires a loan-like obligation to repay. The Commissioner appealed to the High Court.
Key findings from the High Court’s decision
The High Court dismissed the Commissioner’s appeal by majority. Gageler CJ, Gordon, Edelman, Steward and Gleeson JJ formed the majority. Jagot and Beech-Jones JJ dissented. This split itself is worth noting: the Commissioner’s argument was not frivolous, but it was ultimately not the construction adopted by the Court.
On preliminary questions, the majority found that the resolutions had the effect of setting aside, but not distributing, the UPEs. The amounts were thereafter held on valid separate trusts — the subject matter, an entitlement to "net income", being sufficiently certain; and no debtor/creditor relationship arose between trustee and beneficiary. On the central question, a UPE that the corporate beneficiary does not call in is not a "loan" for Division 7A purposes. A beneficiary that does nothing does not "provide" financial accommodation under s 109D(3)(b), nor enter a "transaction" under s 109D(3)(d).The Court's reasoning for why this does not constitute a loan for Division 7A purposes.
The majority anchored its construction in the structure and purpose of Division 7A as a regime directed at the transfer of value from a private company. Each limb of the provision — "advance", "provision", "payment", "transaction" — contemplates the company actively doing something, reinforced by s 109D(4), under which a loan is made when an amount is "paid" or anything in s 109D(3) is "done." 
Mere inactivity by Gleewin Investments could satisfy none of these verbs. The provision of financial accommodation requires "some initial or anterior transfer of value ... involving some bilateral activity"; acquiescence in the retention of funds is not a "transaction," a word that connotes an interchange between parties.
The majority considered that there was no provision of financial accommodation when a private company does nothing.
The dissentients, Jagot and Beech-Jones JJ, would have allowed the appeal, holding that giving or granting time to pay a debt is itself a "provision of ... financial accommodation", and therefore a loan for Division 7A purposes. The 5:2 split underscores that the question was genuinely open.
What the Bendel decision means for you
The decision is a significant and welcome clarification for private groups, but it is not a licence to disregard Division 7A. The interaction with Subdivision EA, s 100A and trust deed drafting means each structure must be reviewed on its own facts.
We recommend that affected trustees and private groups:
- Review current and prior-year UPE positions and existing sub-trust and complying-loan arrangements.
- Assess whether amendment or objection opportunities exist for amounts previously treated as deemed dividends.
- Review trust deeds and resolution wording in light of the majority's emphasis on the findings in Bendel that the trust income was "set aside" but not distributed, which gave rise to separate trusts and not a debtor-creditor relationship.
- Await and assess the ATO's decision impact statement before unwinding documented arrangements.
Taxpayers that believe their arrangements may be impacted by the decision should review their group's UPE and Division 7A exposure, quantify potential amendment opportunities, or stress-test their trust distribution arrangements.
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