Five to two, an unpaid present entitlement is not a Division 7A loan. The win is real. The prize has changed.
The Commissioner finally lost Bendel. Five to two in the High Court: an unpaid present entitlement is not a Division 7A loan.
Commissioner of Taxation v Bendel [2026] HCA 18.
Twelve months ago this was the most anticipated tax decision in years. It lands as a postscript. The win is real. The fun is gone.
The win, 16 years in the making
Since 16 December 2009 the ATO has maintained that a corporate beneficiary which does not call for payment of its trust entitlement provides “financial accommodation”, and so makes a loan, under s 109D(3)(b) ITAA36 (TR 2010/3, now TD 2022/11).
The AAT rejected that view in 2023. The Full Federal Court (Logan, Hespe and Neskovcin JJ) rejected it in 2025. Gageler CJ, Gordon, Edelman, Steward and Gleeson JJ have now ended it: “With respect, that submission is misconceived” [71].
The company did nothing, and nothing is not a loan: “Its mere inactivity cannot satisfy the language of ‘advance’, ‘provision’, ‘payment’ or ‘transaction’” [72]. “Simply doing nothing, or acquiescing to the retention of funds, is not a transaction which in substance effects a loan” [74].
The sting: the majority endorsed the Tribunal’s conclusion that “the Commissioner has taxed the wrong taxpayer” [75]. Subdivision EA, headed “Unpaid present entitlements”, pointed at the shareholder all along. Jagot and Beech-Jones JJ dissented. For Jagot J, the financial accommodation “cannot be seriously doubted” [187].
Why nobody is popping champagne
On 12 May 2026 the Government announced a 30% minimum tax on discretionary trusts from 1 July 2028. The trustee pays. Non-corporate beneficiaries receive a non-refundable credit. Corporate beneficiaries receive no credit at all. The factsheet is blunt: the design “will ensure the minimum tax cannot be avoided by cycling income through a ‘bucket’ company”.
If enacted, the strategy Bendel just protected - distribute to a bucket company, leave the cash in the trust - dies on 1 July 2028. The trustee pays 30% and the company is assessed on the same income with no credit. The rate arbitrage is not merely gone. It is inverted.
Does the win still matter
First, every year to 2027-28 is governed by the law as it stands, and that law is Bendel, not TD 2022/11.
Second, 16 years of administration needs unwinding: complying loan agreements, sub-trust arrangements, objections held pending the appeal. Watch for the decision impact statement.
Third, the minimum tax is an announcement, not an Act. Consultation may yet reshape it.
To the true believers who ran this argument for 16 years: you were right, and the High Court says so. Government just made sure the prize is a trophy, not a treasure.
General information only. This note was accurate when written. The law may have changed since and the note is not updated. It is not legal or tax advice, does not take account of your circumstances and must not be relied upon as a substitute for advice on your own matter. If the issue is live for you or your client, email arda@nortonquaytaxlaw.com.au for advice on the current position.