The ATO’s loss in the Full Federal Court in the matter known as ‘Bendel’ has stirred the pot in more ways than one!
The Bendel case involved a controller of a trust (known as Mr Bendel) who was being assessed by the ATO for payment of more than a million dollars in taxes and penalties. However, the ATO sought the court to rule on a specific part of the law.
Where the ATO lost was if you have a trust that distributes to a company but keeps all the money, then that amount owed to the trust will not be treated as a loan from the company back to the trust.
Many trusts may take this approach, but why is this a problem?
Two other parts of the law also need to be considered. For example, if you distribute to the company and the trust then gives access to any of the individual beneficiaries to that money, there are specific provisions that say the amount distributed to the company is now a Division 7A loan.
This is what Mr Bendel did, which may mean there may still be issues if he is within the amendment period.
Secondly…
Where a distribution from a trust is made to a lower tax beneficiary as part of a tax minimisation scheme, the whole amount can then be taxed to the trust at 47%.
However, before you decide, ‘I am going to distribute all of my trust profit to a company and only pay 25% on tax’, be mindful of the rules not considered during the Bendel case.
Even if the ATO doesn’t get leave to appeal to the High Court or if they do and lose, they will have some other very big sticks they can use.
With plenty of media coverage in recent months (since the case went to court in February 2025) reporting that the ATO should be paying back money to up to a million trusts as a result of the decision, it’s more important than ever to receive tax advice from a professional adviser.
We’re here to help.
Review our Accounting, Compliance & Advisory solutions HERE
Find out how we can help by booking in your tax planning session with us before the end of the financial year.
Disclaimer: The information contained in this publication is for general information purposes only, professional advice should be obtained before acting on any information contained herein. The receiver of this document accepts that this publication may only be distributed for the purposes previously stipulated and agreed upon at subscription. Neither the publishers nor the distributors can accept any responsibility for loss occasioned to any person as a result of action taken or refrained from in consequence of the contents of this publication.