ATO appeals to High Court in the Bendel Case decision

The Australian Taxation Office (ATO) has now applied to the High Court for special leave to appeal the Full Federal Court’s decision in FCT v Bendel [2025] FCAFC 15.

Last month, we released a Tax Alert (see here) after the Federal Court delivered their unanimous decision that an unpaid present entitlement (or UPE) owed by a discretionary trust to a corporate beneficiary is not a “loan” for Division 7A purposes.

The ATO has also issued an Interim Decision Impact Statement (DIS) in response to the Full Federal Court decision. A DIS provides information for taxpayers and advisers, and includes: details of the case, a brief summary of facts, issues decided by the court or tribunal, and relevant legislation and case law.

What is the ATO’s current view?

The ATO view can be summarised as follows:

• Will continue to administer the tax rules in their current form (ie. treating UPEs as loans for Division 7A purposes) until the outcome of the appeal process is known.
• Will hold off processing amendments, private rulings and objections relating to this issue until the appeal process is finalised.
• Regardless of the new interpretation by the Full Federal Court, the reimbursement agreement rules in section 100A will continue to be considered, and this decision does not change the potential for exposure to Subdivision EA (ie. a trust makes a UPE to corporate beneficiary, and then the trust makes a payment or loan, to the shareholders or associates of the corporate beneficiary).

What can we do now?

Unfortunately, the way forward in the short term is unclear until we see how the appeal process moves to, and through, the High Court.

Again, there is an element of having to “wait and see” what happens next. We will continue to keep you updated on all future developments.