On 10 June 2026, the High Court handed down its decision in Commissioner of Taxation v Bendel [2026] HCA 18, dismissing the Commissioner's appeal by a five to two majority.
The Court held that where a trust resolves to set aside income for a corporate beneficiary and that entitlement remains unpaid, the unpaid present entitlement does not, of itself, constitute a loan for the purposes of Division 7A.
This directly contradicts the position the ATO has maintained since 2009 and applied through its public rulings.
Why it matters
Division 7A treats certain payments and loans by private companies to shareholders and their associates as deemed unfranked dividends. Since 2009 the ATO's position has been that an unpaid entitlement owed by a trust to a corporate beneficiary is financial accommodation, and therefore a loan, and therefore a deemed dividend unless it was put on complying Division 7A terms with minimum yearly repayments and benchmark interest.
For a great many private groups, that has driven the annual routine of either paying the entitlement across or documenting a seven year loan agreement.
The High Court's reasoning was grounded in the statutory text. Division 7A requires the private company to actively do something to transfer value. A company that simply does not call for payment of its entitlement has not provided financial accommodation and has not entered a transaction that effects a loan. The Court also noted that Parliament had specifically addressed unpaid entitlements in Subdivision EA, and using the general loan provisions to capture the same arrangements was inconsistent with that structure.
What the ATO has said since
The ATO published a Decision Impact Statement, with consultation closing on 24 July 2026. It accepts that the High Court's reasoning is clear and contradicts its public ruling, that the ruling will be withdrawn, and that other ATO advice will be reviewed. Its stated position is that no loan arises for Division 7A purposes where a private company beneficiary does nothing in respect of its entitlement.
The words doing nothing are load bearing. Any dealing with those funds that amounts to a payment or a loan is a different matter.
The three reasons not to celebrate too hard
Other provisions still apply. Bendel decided one question about one definition. Subdivision EA can still operate where the trust makes payments or loans to shareholders of the corporate beneficiary. Section 100A remains available where there is a reimbursement agreement, and the Commissioner has an unlimited amendment period for section 100A. Part IVA has not gone anywhere. Whether any of these apply depends entirely on the facts, the deed, and what actually happened to the money.
The government intends to legislate the ATO's position. The 2018-19 Budget announced reforms to Division 7A that included bringing unpaid entitlements into the definition of loan. The trust minimum tax consultation paper confirms the government's commitment to that measure and seeks feedback on how it would interact with the new design.
The trust minimum tax makes the question largely academic anyway. If corporate beneficiaries get no offset from 1 July 2028, the whole strategy of distributing to a bucket company becomes uneconomic regardless of how the Division 7A question is resolved. The practical window in which Bendel is useful may be as short as the 2026, 2027 and 2028 income years.
The honest advice
Do not restructure existing arrangements on the strength of this decision without getting it looked at properly. Existing Division 7A loan agreements have their own consequences if you stop servicing them. And the ATO's Decision Impact Statement indicates favourable treatment is being effectively grandfathered for schemes begun before the ruling is withdrawn, which is a detail that matters and is easy to get wrong.
This is a case where the headline and the correct response are quite different things.