Taxpayers In Flux: ATO Granted Special Leave To Appeal Landmark Bendel Ruling

Posted on by Admin

13 June 2025

Today, Friday 13 June, the Australian Taxation Office (ATO) issued a statement announcing that the High Court has granted the ATO special leave to appeal the Full Federal Court (FFC) decision in the Bendel case. The High Court’s decision to grant the ATO special leave likely stems from the fact the case holds significant implications for such a large segment of taxpayers, and the need for definitive legal clarity on the treatment of UPEs under the Division 7A law.

As a reminder, our previous newsletters on the Bendel case discussed the court decisions in detail:

  • Newsletter dated 13 October 2023 on the Administrative Appeal Tribunal (AAT) decision.
  • Newsletter dated 21 March 2025 on the FFC decision.

In today’s ATO statement, deputy commissioner Louise Clarke acknowledged the broad impact of the Bendel case on taxpayers:

“The Bendel case is the first time that the ATO’s longstanding view has been considered by the Courts. In February, the Full Federal Court reached a decision that’s contrary to the ATO’s published position. We’re now appealing this decision in the High Court because the decision is of wide interest and will affect many private company taxpayers”.

Consistent with the ATO’s Interim Decision Impact Statement published in March subsequent to the FFC decision, the new ATO statement indicated that:

  • Until the High Court rules on Bendel, the ATO will continue to administer their views on UPEs and Division 7A as expressed in Taxation Determination TD 2022/11 Income tax: Division 7A: when will an unpaid present entitlement or amount held on sub-trust become the provision of ‘financial accommodation’? No blanket exercise of discretion will be provided by the Commissioner for taxpayers who rely on the FFC decision that UPEs are not Division 7A loans.
  • Regardless of the High Court decision, section 100A has the potential to apply to corporate beneficiary UPEs particularly where the UPEs are not put on complying Division 7A loan terms. The ATO’s views on this matter are detailed in Practical Compliance Guideline PCG 2022/2 Section 100A reimbursement agreements – ATO compliance approach.

So, while we await the outcome of the appeal process, which the ATO previously indicated could take many months, the Division 7A landscape remains clouded in uncertainty.

In line with the discussions our impacted clients have had to date with their Cooper Partners engagement teams, the ATO statement ended as follows:

“If a taxpayer has been following the ATO guidance and if they continue to do so, then they will have certainty regardless of the outcome of the High Court proceedings. That is, they will not be facing the prospects of a deemed dividend or potential application of other integrity provisions. Of course, it’s up to individual taxpayers to decide their approach post the Full Court’s decision, and pending the outcome of the High Court appeal. However, any decision needs to be made with knowledge of the relevant risks and their individual circumstances. I strongly encourage affected taxpayers to seek advice appropriate to their particular circumstances.”

Stay tuned.

This newsletter is current as of  13 June 2025, however, please note that announcements and changes are being made by the Government and the ATO regularly, and we expect that the tax and business-related responses will continue to evolve.  Before acting upon the content of this newsletter, please contact us to discuss how the above applies to your specific circumstances.

This information is general advice only and neither purports, nor is intended to be advice on any particular matter.
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