Smart Trust Planning: Navigating Section 100A, Division 7A, and the Bendel Case

Smart Trust Planning: Navigating Section 100A, Division 7A, and the Bendel Case | Family Trust Tax Planning

Updated 24 August 2026: the High Court decided the Bendel case on 10 June 2026 and the Commissioner's appeal was dismissed. The ATO now accepts that no loan arises under Division 7A where a private company beneficiary does nothing about its entitlement to trust income. The Division 7A section below has been rewritten to reflect that, along with several other corrections. Earlier versions of this article described the appeal as still on foot.

Family trusts are one of the most powerful structures in Australia for asset protection and tax planning. But like a delicate, high-performance machine, they need constant care and expert management to run correctly—especially with the ATO increasing its scrutiny.

When managed well, a trust provides a strong barrier of protection and immense flexibility. When managed poorly, it can lead to complex problems and severe tax consequences.

Today, we're diving into the key strategies and high-stakes "hot topics" that every trust owner needs to have on their radar.

Our Client's Experience: 

"I’m incredibly grateful to Ben at Aevum Accounting for his exceptional support in setting up our new company. From start to finish, he made the process seamless and stress-free with his clear communication, professionalism, and in-depth knowledge. It’s reassuring to know that all of my accounting and tax needs are in expert hands." — Bianca

1. The Anti-Avoidance "Spy Novel": Understanding Section 100A

Section 100A is the ATO’s anti-avoidance rule designed to stop trusts from playing "tax games." It targets arrangements where a trust distributes income to one beneficiary (e.g., a low-income adult child) on paper, but the actual benefit is enjoyed by someone else (e.g., the parents, who are on a high tax rate).

• The Red Flag: A trust distributes $30,000 to a university student, who then immediately "gives" that exact amount back to their parents to pay for the family holiday or mortgage. The ATO sees this as a "reimbursement agreement" designed purely for tax avoidance.

• What is 'Genuine'? If the distribution genuinely benefits the adult child—by paying for their university fees, their car, or reasonable board while living at home—it's generally fine. The tax outcome must match the economic reality of who truly benefits.

  
  

2. The Big Decision: Removing a Beneficiary

This sounds drastic, but it can be a critical strategic move. Common reasons include:

• Asset Protection: If a beneficiary is in a high-risk profession, removing them is sometimes considered. Bear in mind a discretionary beneficiary has no proprietary interest in the trust's assets to begin with, so the protection this adds is limited. Giving up control, meaning appointor or trustee roles, matters far more than membership of the beneficiary class.

• Foreign Surcharges: A real issue, but the test is not tax residency. State duty and land tax surcharges use the foreign person test from the foreign investment rules, and an Australian citizen is never a foreign person, wherever they live. For a discretionary trust the question is usually control, or who takes in default, rather than who sits in the beneficiary class. For Western Australian property specifically: WA charges 7 per cent foreign transfer duty and has no foreign owner land tax surcharge.

The Trap: get advice before you amend, though this risk is smaller than it is often made out to be. Since the Clark decision and TD 2012/21, the ATO accepts that a valid amendment made under a power in the trust deed does not end the trust and does not trigger CGT event E1 or E2. The risk arises where an amendment goes beyond the power in the deed, or changes the trust so fundamentally that it is a different trust. Stamp duty is a separate state question, not an ATO outcome.

3. The Smart Restructure: Small Business Restructure Rollover (SBRR)

This is a powerful provision that allows eligible small businesses to reorganise their structure without immediate tax consequences. Think of it as moving your chess pieces on the board without paying a penalty for each move.

It allows you to transfer active assets between entities (e.g., from a trust to a company) to:

• Improve Asset Protection: Separate your high-risk trading business from your valuable property, like the building you operate from.

• Improve Succession Planning: Move the business into a structure that suits the next generation. One important limit: the rollover requires that ultimate economic ownership does not change, so it cannot be used to bring in a new business partner. For a discretionary trust it generally needs a family trust election, with everyone involved inside the family group.

The key conditions: it must be part of a genuine restructure of an ongoing business rather than a one-off trick to avoid tax, your aggregated turnover must be under $10 million, and ultimate economic ownership must not change. Stamp duty and GST are not covered by the rollover and need their own look.

The "Hot Topic": Division 7A, UPEs, and the Bendel Case

This is the most complex and contentious issue facing trust owners today.

1. The Basics (Div 7A): Division 7A stops private companies making tax-free loans or payments to shareholders or their associates. Where it applies, the amount is treated as an unfranked dividend and included in that person's assessable income at their ordinary marginal rates. The total of all deemed dividends for a year is capped at the company's distributable surplus.

2. The Bucket Company: A family trust distributes income to a corporate beneficiary so the tax on that slice is the company rate rather than a top personal rate. That is 25 per cent only if the company is a base rate entity. A bucket company fed mainly passive income such as rent, interest or dividends pays 30 per cent. Where the trust does not physically pay the cash across, the result is an unpaid present entitlement.

3. The ATO's old view (TD 2022/11): the ATO argued that an unpaid entitlement was effectively a loan from the company back to the trust, which brought Division 7A into play.

4. What the High Court decided: in Commissioner of Taxation v Bendel, decided on 10 June 2026, the Commissioner's appeal was dismissed. The ATO's decision impact statement now accepts that no loan arises for Division 7A purposes where a private company beneficiary does nothing about its entitlement to trust income. The old view no longer stands.

Where That Leaves Unpaid Present Entitlements

The Division 7A question is now settled: doing nothing about an entitlement is not a loan. What has not gone away is section 100A. The ATO's own statement makes the point that where an entitlement stems from a reimbursement agreement, section 100A can still apply and tax the trustee at the top marginal rate.

So the two questions are separate, and clearing the first does not answer the second. A distribution to a bucket company still has to be a genuine arrangement, not one where the benefit quietly ends up somewhere else.

If you are sitting on a prior year deemed dividend assessment for an unpaid entitlement, this is now time-sensitive rather than a waiting game, because objection and amendment periods run out.

What Does This Mean for You? (Practical Advice)

• If you already put an entitlement on complying loan terms: do not simply stop repaying. Once you have signed a loan agreement you have a loan in its own right, whatever Bendel says about unpaid entitlements, and missing the minimum yearly repayment can create a deemed dividend. Get advice on unwinding it properly rather than walking away from it.

• If you have a prior year deemed dividend assessment: you now have a decided High Court authority in your favour. Objection and amendment periods have deadlines, so this is worth looking at now rather than later.

• If you have entitlements you have not dealt with: the Division 7A pressure is off, but check the section 100A position, and check whether Subdivision EA is in play. That one catches payments or loans the trustee makes to the company's shareholder while the entitlement is outstanding.

This Is Not a DIY Area

Family trusts, unpaid entitlements and bucket companies offer real flexibility and protection, and the rules around them are intricate and they move. The Division 7A position on unpaid entitlements changed in June 2026 because of a single court decision, which is a fair illustration of why this is worth reviewing rather than setting and forgetting.

This is not an area for guesswork. Making the wrong move based on outdated advice or a misunderstood court case can result in tens or even hundreds of thousands of dollars in unexpected tax.

At Aevum Accounting, we specialise in navigating these exact rules. We help you structure your affairs to be compliant, protected, and optimised for your long-term goals, giving you peace of mind.

Book a consultation with our team today to ensure your trust structure is a fortress, not a house of cards.

Need the accounting and admin side of a self managed super fund handled? Our SMSF accountants in Perth can help.

Prefer to listen? We covered this in Smart Trust Planning Navigating Division 7A and Family Trusts, episode 22 of the Aevum Accounting Podcast.

Disclaimer: The information and strategies shared in this article are for general informational purposes only and do not constitute specific tax or financial advice. Everyone's situation is unique, and tax laws are complex and constantly evolving. For personalised advice tailored to your specific individual or business needs, we always recommend consulting with a qualified professional at Aevum Accounting.