As reported in the April 2025 edition of VOICE, the ATO has filed a special leave application with the High Court in respect of the Full Federal Court’s decision in FCT v Bendel & Anor [2025] FCAFC 15 (‘Bendel’s case’). 

In Bendel’s case, the Full Federal Court found that unpaid present entitlements ('UPEs') owing by a trust to a corporate beneficiary were not loans for Division 7A purposes, which refutes the ATO’s long-held view on the matter (currently contained in TD 2022/11). 

The ATO issued an interim decision impact statement on Bendel’s case, where it has stated it does not intend to revise its current views relating to UPEs owing to corporate beneficiaries until the appeal process is finalised (even though these views directly contradict the findings of the Full Federal Court). At the time of writing, it was still not known whether the appeal will be heard by the High Court. 

Many corporate beneficiaries have UPEs in their accounts for the 2023 income year that, according to the ATO, became Division 7A loans during the 2024 income year. 

In line with TD 2022/11, these ‘loans’ will trigger Division 7A deemed dividends unless they are repaid or put on complying loan terms before the company’s ‘lodgment day’ for the 2024 year. This ‘lodgment day’ may be as late as 15 May 2025, which is obviously fast approaching. 

Given the uncertainty created by the ATO’s response to Bendel’s case, the NTAA contacted the ATO, requesting a blanket lodgment deferral be granted for the 2024 income tax returns of private companies impacted by Bendel’s case. 

Unfortunately, the ATO has advised that it is not granting extensions of time for lodgment solely because of the Commissioner’s application for special leave in Bendel’s case. 

Accordingly, tax advisers now must advise their clients to ‘pick their poison’ between: 

• following the ATO’s views (which is currently wrong according to the Full Federal Court); or 
• relying on Bendel’s case (which could result in Division 7A consequences if the ATO eventually wins at the High Court, which could be years away). 

Editor's note: The NTAA is disappointed that tax advisers have been left in this unenviable position, which could have been avoided if the ATO applied a more pragmatic administrative approach. We will be discussing the implications of Bendel's case in the NTAA's 2025 Day 2 Tax Schools seminar running throughout May and June 2025.