Every accountant I know has had the same conversation this month. A client with a family trust and a corporate beneficiary reads a headline about a big win against the ATO and asks: does this mean I don't have to worry about Division 7A anymore? The honest answer is no, but something real did change, and if you run a trust with a company beneficiary, you need to know exactly what and what didn't.

The case is Commissioner of Taxation v Bendel, decided by the High Court on 10 June 2026. The Court dismissed the Commissioner's appeal by a 5-2 majority, closing off years of uncertainty on one specific question: is an unpaid present entitlement from a trust to a corporate beneficiary automatically a loan under Division 7A? The answer is no. The ATO has since released its Decision Impact Statement accepting the outcome, which is the trigger for this article.

What actually happened in the Bendel case

For years the ATO's position was that when a trustee resolves to distribute income to a private company beneficiary but doesn't physically pay the money across, the resulting unpaid present entitlement (UPE) could itself be treated as a loan under section 109D of Division 7A. That mattered because Division 7A loans need to be on commercial terms, with minimum annual repayments and interest, or the balance gets taxed as an unfranked dividend to the trust or its controllers.

Steven Bendel challenged that view. The matter went through the Administrative Review Tribunal, a single Federal Court judge, the Full Federal Court, and finally the High Court. At every stage, the taxpayer won. The High Court's majority held that where a trustee's resolution effects a "setting aside" of an amount on separate trust for the company, that arrangement does not, by itself, create a loan for Division 7A purposes. The precise wording of the trust deed and the distribution resolution matters here. This isn't a blanket exemption; it's a finding about what a UPE legally is.

What the ATO's Decision Impact Statement says

The ATO's DIS confirms it accepts the Court's reasoning: a UPE, without more, does not automatically constitute a Division 7A loan. That's a genuine shift in the compliance landscape for family groups running a trust and bucket company structure. Thousands of businesses have been entering complying loan agreements and making minimum repayments purely to manage a risk that, on this reading of the law, may never have existed in the way the ATO assumed.

But read the DIS carefully and the ATO is not conceding much ground beyond that single technical point. It's explicit that the decision is confined to its facts and turns on the specific deed and resolution wording considered by the Court. Arrangements that differ, even slightly, may not get the same treatment. And critically, the ATO flags that it still has other tools in the kit.

What still applies: section 100A and Subdivision EA

This is the part getting lost in some of the celebratory commentary, and it's the part I want every trustee to sit with. Bendel deals only with whether the UPE itself is a Division 7A loan. It says nothing about how the funds represented by that UPE are actually used.

Section 100A remains fully in force. If a trust distribution to a corporate beneficiary is made as part of a reimbursement agreement, where someone other than the company genuinely benefits from the funds while the company merely wears the tax liability, the ATO can treat the distribution as if it never happened for tax purposes and tax the trustee at the top rate. Section 100A has nothing to do with whether the UPE is a "loan." It looks at intent and benefit.

Subdivision EA is the other one to watch. It can deem a payment or loan made by the trust to a shareholder or associate of the corporate beneficiary to be an unfranked dividend, where the trust owes money to the company (the UPE) and then turns around and advances funds to that shareholder or associate instead. In plain terms: if the company is owed money by the trust, and the trust then lends money to you personally as the trust's controller, Subdivision EA can tax that as if the company paid you a dividend directly. Bendel does nothing to soften this. If anything, advisers are now paying closer attention to Subdivision EA because it's the mechanism the ATO is more likely to lean on going forward.

Part IVA and the general anti-avoidance risk

Part IVA sits above both of these. It's the general anti-avoidance provision, and the ATO's DIS specifically notes it hasn't gone away. If a family group restructures purely to exploit the Bendel outcome, with no commercial purpose beyond avoiding tax, Part IVA can unwind the tax benefit regardless of what Division 7A says about UPEs. Don't treat this decision as a green light to get creative.

Practical trust minute actions to take now

If your trust has a corporate beneficiary with an unpaid entitlement sitting on the balance sheet, here's what I'd actually do this month, not what I'd theorise about.

  • Review the exact wording of your distribution resolutions. The Bendel outcome turned on specific language: a genuine setting aside of the entitlement on separate trust for the company. Vague resolutions, or ones that don't clearly separate the company's entitlement from the trust's general funds, are the ones still exposed.
  • Trace where the money actually went. If the UPE funds have been used by the trust, or lent on to a beneficiary, family member, or related entity, that's where section 100A and Subdivision EA exposure lives. Get a clear picture of the cash flow, not just the accounting entries.
  • Don't rush to unwind existing Division 7A loan agreements. It's tempting to think you can now cancel a complying loan agreement over a historical UPE and stop making minimum repayments. Talk to your accountant first. Unwinding can itself trigger consequences, and the interaction with Subdivision EA needs to be checked before you touch anything.
  • Keep documenting new UPEs properly. Even without the Division 7A loan risk, a poorly worded or backdated resolution is still a red flag for section 100A. Get resolutions signed before 30 June, in writing, specific about amounts and beneficiaries.
  • Watch the consultation on the proposed minimum tax. Treasury has released a consultation paper on a 30% minimum tax for discretionary trusts, proposed from 1 July 2028, and it explicitly references the Bendel interaction and the previously shelved 2019 Budget measure to bring UPEs within Division 7A by legislation. Submissions closed 31 July 2026. This space is not settled; treat Bendel as a current-law win, not a permanent one.

Cash handling: the practical risk most people miss

The single biggest mistake I expect to see over the next twelve months is treating a UPE as "free" money now that it's not automatically a loan. It isn't free. The company is still the legal owner of that entitlement. If the trust uses those funds and the company never calls for payment, you need a clear commercial reason for that arrangement, and you need the paper trail to back it up. Ask yourself: who benefits from the funds day to day? Is it genuinely the company, building retained capital for its own purposes, or is it effectively the family, using company money to fund lifestyle spending or other investments while the company just absorbs a tax bill on paper? That question is exactly what section 100A is designed to test, and Bendel changes none of it.

What this means for your structure going forward

For younger wealth builders using a trust and bucket company structure to hold business profits or investment income, Bendel is good news on the margins. It removes one layer of forced compliance (loan agreements and minimum repayments purely to satisfy Division 7A on a UPE) where the facts genuinely mirror the case. But the underlying question, whether your trust and company arrangement has real commercial substance, matters more than ever. The ATO has effectively signalled it will lean harder on section 100A and Subdivision EA now that its favoured Division 7A argument has failed. If you're setting up a new trust and company structure, or reviewing an existing one, this is exactly the kind of detail that needs proper documentation from day one, not a retrofit after the ATO comes knocking.

Frequently Asked Questions

Does the Bendel case mean Division 7A no longer applies to trust distributions?

No. Bendel only deals with whether an unpaid present entitlement, on its own, is automatically treated as a loan under Division 7A. The High Court said it isn't. Division 7A still applies in full to actual loans, payments and debt forgiveness between a private company and its shareholders or associates.

What is an unpaid present entitlement (UPE)?

A UPE arises when a trustee resolves to distribute trust income to a beneficiary, often a corporate beneficiary, but the cash entitlement is not physically paid out. The company records the amount owing to it, and the funds typically stay available for the trust to use.

Can the ATO still challenge trust distributions to a company beneficiary?

Yes. The ATO retains section 100A, Subdivision EA of Division 7A, and Part IVA. These provisions look at how the funds are actually used, who benefits from them, and whether the arrangement has a genuine commercial purpose, independent of whether the UPE itself is a loan.

What is Subdivision EA and when does it apply?

Subdivision EA can deem a payment or loan from the trust to a shareholder or associate of the corporate beneficiary to be a dividend, where the trust owes the company money (the UPE) and then advances funds to that shareholder or associate. It targets the flow of funds after the UPE is created, not the UPE itself.

Should I still put a Division 7A loan agreement in place for a UPE?

It depends on your structure and how the funds are used. Bendel removes the automatic deeming, but a properly documented complying loan agreement can still be the safest way to formalise a UPE where the trust intends to keep using the funds, particularly while the ATO's post-Bendel administrative position and any legislative response are still developing.

Will the government change the law in response to Bendel?

It's under active consideration. Treasury's consultation on a proposed 30% minimum tax on discretionary trusts references interactions with Bendel and previously announced but unenacted measures to bring UPEs within Division 7A. Nothing is legislated yet, but the settings could change before 1 July 2028.

What should trust minutes say about UPEs now?

Minutes should clearly record the trustee's resolution, the amount and character of the entitlement, and whether it is being set aside on separate trust for the beneficiary. Vague or backdated resolutions were a live issue in the underlying litigation and remain a practical risk area regardless of the Division 7A outcome.

Bendel is a genuine win, and I don't think advisers should undersell it. But I'd rather my clients treat it as one fewer risk to manage, not zero risk. The trusts that get into trouble from here won't be the ones with a UPE sitting on the balance sheet. They'll be the ones who can't explain, in plain terms, where the money actually went.

If you run a trust with a corporate beneficiary and you're not sure whether your resolutions and cash flow would hold up under a section 100A review, that's exactly the kind of structural health check worth doing before the next distribution season, not after.

Apply for a Strategy Session to review your trust and company structure.

Andrew Romano is a Chartered Accountant and SMSF Specialist based in Sydney. He works with high-income individuals, business owners and investors on tax planning, structuring and self-managed super funds.

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