High Court Bendel Decision: What It Means for Division 7A, UPEs and Trust Structures in Australia

Last Updated June 2026

In a landmark 5–2 majority decision, the High Court of Australia ruled in Commissioner of Taxation v Bendel [2026] HCA 18 that an unpaid present entitlement (UPE) from a discretionary trust to a corporate beneficiary is not automatically a loan for Division 7A purposes.

For many private business groups, family trusts and investors, this decision provides greater flexibility when using corporate beneficiaries within trust structures. However, it is not a complete exemption from the tax rules. Other integrity provisions—including Subdivision EA and section 100A—may still apply, making professional advice more important than ever.

What was the Bendel case about?

For many years, the Australian Taxation Office (ATO) treated unpaid present entitlements (UPEs) owed to corporate beneficiaries as loans under Division 7A. This meant many business owners were required to:

• Enter into complying Division 7A loan agreements.

• Make minimum annual repayments.

• Pay interest at prescribed rates.

• Manage additional compliance obligations to avoid deemed dividends.

The High Court rejected this long-standing interpretation.

The Court found that simply leaving a UPE unpaid does not, by itself, create a loan under Division 7A. In other words, where a corporate beneficiary merely leaves its entitlement in the trust without taking further action, this alone is not enough to trigger Division 7A.

Importantly, the decision was based on the particular trust deed and distribution arrangements in the Bendel case, highlighting the importance of properly drafted trust documentation.

The ATO response to the Bendel decision

On 26 June 2026, the ATO released its Decision Impact Statement (DIS) confirming that it accepts the High Court's decision while outlining how it intends to administer the law going forward.

Key takeaways from the ATO

• A UPE will not automatically be treated as a Division 7A loan where the corporate beneficiary simply leaves the entitlement unpaid.

• Subdivision EA may still apply if the trust makes payments, loans or debt forgiveness to a shareholder or associate of the corporate beneficiary.

• Section 100A may still apply where arrangements fall outside ordinary family or commercial dealings and are designed to obtain a tax benefit.

• The ATO intends to withdraw TD 2022/11 and review other public guidance.

• The Decision Impact Statement is open for consultation until 24 July 2026, with further guidance expected..

Why this matters for private business groups

For many family groups, trusts distribute income to a corporate beneficiary each year to access the corporate tax rate while retaining funds for future business growth or investment.

Since the ATO changed its administrative approach around 2009–2010, these arrangements have often required Division 7A loan agreements, annual repayments and ongoing compliance. The Bendel decision may restore greater flexibility for appropriately structured arrangements however several important issues remain.

• Outcomes will depend on the wording of your trust deed, distribution resolutions and accounting records.

• Division 7A can still apply where actual loans are created or other transactions occur.

• Subdivision EA and section 100A remain important anti-avoidance provisions.

• Existing Division 7A loan agreements established under previous ATO guidance may continue to operate.

• Future legislative changes remain possible.

What should business owners do now?

• Review Existing Trust Arrangements - Review current and historical unpaid present entitlements, trust deeds and accounting records to understand how the Bendel decision may affect your structure.

• Strengthen your Documentation - Trust distribution resolutions and accounting records should accurately reflect the intended legal outcomes and be consistent with the principles considered by the High Court.

• Monitor Future Developments - The ATO is continuing to review its public guidance, and future legislative changes cannot be ruled out.

Final Thoughts

The Bendel decision is one of the most significant trust taxation cases in more than a decade.

While it provides welcome certainty on the treatment of unpaid present entitlements under Division 7A, it also creates new planning opportunities—and raises important questions about the interaction of other integrity provisions.

For many private business groups, now is an ideal time to review trust structures, company beneficiaries and long-term tax planning strategies to ensure they remain appropriate under the evolving tax landscape.

If you'd like to discuss how the Bendel decision affects your business, get in touch today to arrange a consultation.

Frequently Asked Questions

1. Does the Bendel decision mean Division 7A no longer applies?

No. The decision only confirms that an unpaid present entitlement is not automatically treated as a loan. Division 7A can still apply in many other situations involving loans, payments or debt forgiveness.

2. What is an unpaid present entitlement (UPE)?

A UPE arises when a trust distributes income to a beneficiary but does not immediately pay the cash. The beneficiary remains legally entitled to receive the amount.

3. Should I change my trust structure because of Bendel?

Not without professional advice. Every trust deed, business structure and tax position is different, and other tax provisions may still affect your circumstances.

4. Can previous Division 7A arrangements be reviewed?

Potentially. Some taxpayers may be able to review previous assessments or historical arrangements, although eligibility will depend on the facts of each case and applicable time limits.