ATO's Views Continue To Be Challenged

On Tuesday, 14 October 2025, the High Court of Australia heard the appeal in Commissioner of Taxation of the Commonwealth of Australia v. Bendel & Anor. The appeal to the High Court was from the Full Federal Court's decision of 19 February 2025.

The decision by the Full Federal Court was significant as it reversed the Australian Tax Office's (ATO) longstanding view about the tax consequences of unpaid present entitlements (UPEs) from trusts to corporate beneficiaries.

Bendel's facts were not uncommon and had been problematic for practitioners for many years. A discretionary trust makes a corporate beneficiary presently entitled to trust income which remains unpaid (the UPE). Prior to 16 December 2009, the ATO held the view that a UPE was not a loan unless the parties actually converted it into an ordinary loan. This meant the trust could retain the use of the distributed trust income (e.g. for working capital) without attracting any further tax implications under