The Accountant Versus the ATO – High Court Case Could Reshape Tax Treatment of Trust Distributions
Posted on October 30th, 2025 by Paul Lyons
It’s not the next block buster movie but does have shades of the ‘Castle’ about it!
A long-running legal dispute between a suburban Melbourne accountant and the Australian Taxation Office (ATO) has reached the High Court, with potential significant implications for how trust distributions are taxed, particularly those involving corporate beneficiaries.
The case, involving accountant Steven Bendel, stems from amended tax assessments issued by the ATO for the 2014 to 2017 financial years. The assessments related to unpaid present entitlements (UPEs) from a trust to a corporate beneficiary, which the ATO argued should be treated as loans under Division 7A of the Income Tax Assessment Act. Division 7A is designed to prevent tax avoidance by ensuring that profits distributed from companies to shareholders or related entities are properly taxed. The ATO’s position is that when a trust makes a corporate beneficiary entitled to income but does not pay it out, that entitlement effectively becomes a loan, triggering Division 7A consequences.
This interpretation has been contentious since the ATO revised its view in 2009, and Bendel’s case has become a focal point for the profession. After several successful rulings in Bendel’s favour at the Administrative Appeals Tribunal and the Federal Court, the matter is now before the High Court.
The outcome will be closely watched as it could affect thousands of small businesses that use trusts and corporate beneficiaries in their structures.
During the recent hearing, the High Court signalled its intent to examine the broader legal foundations of the ATO’s position. Not just whether a UPE is a loan, but also whether there is a debtor-creditor relationship, and what constitutes financial accommodation in this context.
The hearing has been adjourned to allow further submissions, with a final decision expected later this year.
What This Means for You
If you use utilise a trust and use corporate beneficiaries, this case could impact on how distributions are treated for tax purposes. We’re monitoring developments closely and will provide updates to our clients once the High Court delivers its judgment.
In the meantime, if you have questions about Division 7A or trust distribution strategies, please don’t hesitate to reach out. Contact | WLF Accounting & Advisory
