The Bendel Decision: What the High Court’s Trust Ruling Means for Your Business
On 10 June 2026, the High Court handed down a decision that has tax advisors across Australia talking. It is called the Bendel decision, and it overturns a position the ATO has held for sixteen years.
If your business runs a trust that distributes income to a company, this matters to you. Here is what happened, and what it means in plain English.
What the ATO Used to Say
Many small businesses use a trust and company structure together. The trust often allocates income to a company but does not always physically pay that money across straight away.
For years, the ATO treated this unpaid amount as if the company had effectively loaned the money back to the trust. Under tax law, certain loans like this can be taxed as if they were a dividend, often with a large, unwelcome tax bill attached.
This affected a huge number of family and small business structures across Australia.
What the High Court Decided
The High Court disagreed with the ATO. By a 5 to 2 majority, the Court ruled that an unpaid amount owed by a trust to a company is not automatically a loan, just because it has not been paid yet.
This is a genuine win for taxpayers. It removes the automatic risk of that unpaid amount being taxed as a deemed dividend, purely because it was left unpaid.
The ATO has said it is reviewing the decision and will update its guidance.
Why This Is Not the Full Picture
This ruling does not mean every unpaid trust distribution is now completely risk-free. Other tax rules can still apply, separately from this decision.
The outcome in this case also depended heavily on the exact wording of the trust deed involved. Not every trust deed is written the same way, so the same result will not automatically apply to every business.
This is a significant win, but it is not a blanket green light to ignore how unpaid distributions are managed.
What to Do If This Applies to You
Do not assume nothing has changed. The principle is positive, but your specific situation still needs checking.
Get your trust deed reviewed. The wording of your deed matters more than ever in light of this decision.
Talk to your accountant before 30 June. Year-end is the right time to review how trust distributions are being handled.
Wait for further ATO guidance. The ATO has indicated it will update its position. Future guidance may affect how this applies going forward.
Frequently Asked Questions
Does this mean I can stop worrying about Division 7A? No. Other provisions can still apply to unpaid trust distributions. This decision narrows one specific risk, not all of them.
Does this affect existing arrangements from previous years? Possibly, but it depends on your trust deed and how amounts were recorded. This needs individual review, not a general assumption.
Should I change my trust deed because of this case? Not without advice. The case outcome depended on specific wording, and changes to a trust deed carry their own risks if done incorrectly.
Get Reliable Advice Before EOFY Talk to Edulink
Tax decisions like this can change how trust and company structures should be managed. You do not have to work it out alone, especially with EOFY approaching.
Edulink Payroll Services charges $750 per employee, per year, covering payroll, compliance, and reporting, for small and medium businesses across greater Sydney and Campbelltown.
Have more employees? Call us for a discounted rate.
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