iscoverYesterday, the High Court of Australia heard the Commissioner of Taxation’s appeal in the ongoing Bendel saga. The judgment is expected to be handed down early next year.
High Court hears Bendel appeal
15 October 2025
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7 minute read
On Tuesday (14 October), the High Court of Australia heard the appeal in Commissioner of Taxation of the Commonwealth of Australia v. Bendel & Anor.
In June, the Commissioner of Taxation was granted special leave to appeal the Full Federal Court's decision in Commissioner of Taxation v Bendel [2025] FCAFC 15, which ruled in favour of taxpayer Steven Bendel.
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The decision by the Full Federal Court was significant as it challenged the ATO's longstanding view about the tax consequences of unpaid present entitlements (UPEs) owing to corporate beneficiaries.
The Full Federal Court determined that a UPE arising from an entitlement to income of a trust was not a loan under Division 7A of Part III of the Income Tax Assessment Act 1936, contradicting the ATO's views set out in Taxation Determination TD 2022/11.
The tax community has been watching this case closely, as it could alter the ATO’s long-standing approach to how UPEs are treated for Division 7A purposes.
The ATO previously made it clear that it would maintain its views in TD 2022/1 until the High Court delivered its decision on the appeal.
In its oral submissions to the High Court, the Commissioner of Taxation argued that the Full Court’s construction of section 109D(3) had been erroneous in confining it to situations where “there is an anterior payment by the private company and an obligation to repay.”
The Full Court’s construction had been inconsistent with the text of s 109D(3)(b), the Commissioner argued, as the provision of credit or financial accommodation commonly did not involve a payment followed by an obligation to repay.
“On the facts found, [Bendel’s company] Gleewin Investments provided a form of financial accommodation (s 109D(3)(b)). It allowed Gleewin to retain the ongoing use of amounts which it had the right to withdraw,” the Commissioner’s submission read.
“On the facts found, there was also a transaction which in substance effects a loan of money.”
Steven Bendel, the respondent, argued that the ATO’s appeal failed “on both law and facts.”
Both parties agreed that s 109D(3) extended the meaning of ‘loan’ beyond its ordinary meaning. However, they disagreed as to how wide-reaching these extensions were.
Bendel’s submission argued that nothing in sub-s (4) suggested that a loan could be made without an initial payment capable of repayment.
Bendel argued that there had been no agreement for the 2005 Trust to retain or defer payments of the amounts set aside for Gleewin Investments. The trust deed did not denote a due date for payment; therefore, there was no deferral.
While there is no set date for the High Court’s final judgment, it is expected to be passed in the first half of 2026.
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