The Bendel decision: a genuine win, and a closing window for trust structures

On 10 June 2026, the High Court handed down the most significant trust tax decision in over a decade. For business owners running a discretionary trust with a company beneficiary, it removes a costly compliance burden — but it is not the clean exemption some headlines suggest, and its practical value has a defined shelf life. Here is what actually changed, what did not, and why the next three years matter.

The decision in plain English

In Commissioner of Taxation v Bendel [2026] HCA 18, the High Court dismissed the Commissioner’s appeal by a five-to-two majority. In doing so it affirmed the earlier Full Federal Court decision and settled a question that has shaped trust distribution practice for years.

The core finding is this: an unpaid present entitlement (a UPE) owed by a trust to a corporate beneficiary is not, of itself, a “loan” for the purposes of Division 7A of the Income Tax Assessment Act 1936. A company simply not calling for payment of what it is owed is not, without more, financial accommodation or a loan. On the facts, the trustee had resolved to set aside income, which under that particular deed was held on a separate trust for the company — so no debtor-creditor relationship arose.

That overturns the administrative position the ATO had held since December 2009, first through Taxation Ruling TR 2010/3 (now withdrawn) and later reinforced by Taxation Determination TD 2022/11. The issue is potentially relevant to more than 800,000 discretionary trusts across Australia.

What actually changes for trust and company structures

For more than a decade, distributing trust income to a “bucket” company and leaving it unpaid created a compliance obligation: the UPE generally had to be managed under Division 7A, with minimum yearly repayments and benchmark interest, or parked on a sub-trust arrangement. That meant cash moving around the group each year purely to satisfy the rules.

Bendel removes that automatic trigger. Where a UPE genuinely remains a present entitlement — not converted into a loan — the Division 7A machinery does not switch on simply because the company has not been paid. The compliance saving is meaningful, and so is the cash flow flexibility for groups that were previously cycling funds to meet repayment schedules.

“For a lot of family business groups, this lifts an administrative burden that never sat comfortably with how the law was actually written,” says Michael Quinn, founder of The Quinn Group. “But a win on paper only helps you if your own documents support it. That is the part people miss.”

The catch — this is not a free pass

It would be a mistake to read Bendel as “all UPEs are now safe from Division 7A”. It is not a blanket exemption. The outcome turned on three things working together: the wording of the trust deed, the language of the distribution resolution or minute, and how the entitlement was described in the financial statements.

That matters in practice. Minutes that say income has been “paid”, “loaned”, “credited as a loan” or “converted to a loan” are now harder to defend, because they may describe exactly the debtor-creditor relationship the Court said did not exist on Bendel’s facts. Two trusts can reach opposite outcomes on the same income simply because of how their paperwork was drafted.

There is also a practical point on the regulator. As at June 2026, the ATO has issued an interim Decision Impact Statement and indicated it will update its guidance, including the future status of TD 2022/11. Its revised administrative approach is not yet finalised, so any decision should be made on the law as it stands and reviewed as the ATO position settles.

The closing window — why timing matters

Here is the part that reframes the whole decision. In the 2026–27 Federal Budget, the Government announced a proposed 30% minimum tax on discretionary trust income from 1 July 2028. Under the announced design, corporate beneficiaries would not receive credits for tax paid at the trustee level — creating the potential for double taxation and making distributions to bucket companies largely unattractive from that date. The measure is not yet law, but it is firmly on the table.

Put the two together and the practical value of Bendel runs for roughly three income years — 2026, 2027 and 2028 — before that reform changes the calculus. This is a window that is closing, not opening. The sensible response is not to celebrate the headline, but to use the time deliberately and position the structure for what comes next.

What to do now

For most trust groups, the practical next steps fall into three areas:

1. Review your deed and your resolutions. The decision rewards precise drafting. Confirm your deed allows income to be genuinely set aside for a corporate beneficiary, and that your minutes describe it as an entitlement rather than a loan.
2. Consider your prior-year positions. Where Division 7A was applied to UPEs that may not have required it, there may be scope to review earlier treatment — though documented complying loans and sub-trust arrangements you have already put in place remain legally operative and keep their own consequences.
3. Plan for the 2028 reform now. Build the closing window into your distribution planning for the 2027 cycle rather than reacting once the rules change.

This is precisely the kind of question that does not split neatly into “accounting” and “legal”. Whether Bendel helps you depends on a deed (a legal document), how income is resolved and recorded (accounting and legal together), and how it all interacts with Division 7A and the integrity rules (tax). Reviewing one without the others is how problems slip through.

How The Quinn Group approaches this

At The Quinn Group, accounting, legal and financial advice sit in a single advisory relationship. For a question like this, that means your accountant can flag the Division 7A position and our lawyers can read the actual deed and resolution wording — in the same conversation, rather than across two firms that never quite join up. Led by Michael Quinn, with 45 years of professional experience and a practice he has run for more than 35 years, the team reviews the structure as a whole.

“The clients who get the most out of Bendel are the ones who treat it as a prompt to review, not a reason to do nothing,” says Michael Quinn. “Get the deed and the resolutions right while the window is open, and you keep your choices open for 2028.”