After more than three years in the courts, the Bendel case has produced a final answer. The ATO’s long-held position on trust distributions has been rejected. Here is what it actually means for construction business owners.
A Tax Fight That Ran All the Way to the Top
On 10 June 2026, the High Court of Australia dismissed the ATO’s appeal in Commissioner of Taxation v Bendel, finding in favour of taxpayer Steven Bendel and Gleewin Pty Ltd. The Full Bench upheld the earlier Full Federal Court decision from February 2025.
The case is now closed. And the outcome matters to anyone running a construction business through a discretionary trust with a corporate beneficiary, which is a significant portion of the industry.
But before anyone changes the way they structure their business, there is an important caveat. The case is settled. The surrounding risks are not.
What the Case Was Actually About
For more than 15 years, the ATO held the view that when a family trust distributed income to a company, and that money was not immediately paid out but left sitting inside the trust, the unpaid amount constituted a loan. Under Division 7A of the Income Tax Assessment Act, loans from private companies to shareholders or associates can be treated as deemed dividends, triggering a significant tax liability.
The practical effect of the ATO’s position was this: if a builder’s trust distributed income to a related company but held onto the cash for working capital, the ATO could treat that unpaid entitlement as a loan, and demand it either be repaid on formal terms or taxed as a dividend at the top marginal rate of up to 47 per cent.
Steven Bendel, an accountant, challenged that view. His discretionary trust had distributed income to a related company, with the money remaining inside the trust structure rather than being physically transferred. The ATO assessed the arrangement as a Division 7A loan. Bendel disagreed.
The Administrative Appeals Tribunal sided with Bendel in 2023. The ATO appealed to the Full Federal Court, which upheld the original decision unanimously in February 2025. The ATO then sought special leave to appeal to the High Court, which was granted in June 2025. The matter was heard in October 2025, and the final judgment was handed down on Wednesday 10 June 2026.
The High Court’s unanimous decision confirms what Bendel argued from the start: an unpaid present entitlement is not a loan.
Why This Matters for Construction
Family trusts and related company structures are extremely common in the Australian construction industry. Builders, subcontractors and trade businesses use them for two main reasons.
The first is asset protection. Construction is a high-risk business. Contracts go wrong. Disputes arise. Clients pursue claims. A properly structured trust creates separation between the trading business and personal or family assets.
The second is tax flexibility. A trust allows income to be distributed to beneficiaries, including a corporate beneficiary, in a tax-efficient way. Leaving funds in a company beneficiary at the company tax rate of 25 or 30 per cent rather than pulling them out at the top personal rate is a common and legitimate arrangement.
Under the ATO’s pre-Bendel position, that second benefit came with risk. Any unpaid entitlement sitting in the trust could be captured by Division 7A and treated as a loan. That required formal documentation, repayment schedules and compliance work. If it was missed, the tax bill could be substantial.
The High Court’s decision removes that risk, at least for the Division 7A question.
The Complication You Need to Know About
This is where the story gets more nuanced than the headline suggests.
While the ATO’s Division 7A argument has been definitively rejected, the ATO has flagged that the same unpaid entitlement arrangements may be reviewed under section 100A, a separate integrity provision in the tax law. Section 100A targets trust distributions made as part of arrangements where the economic benefit is returned to someone other than the beneficiary.
The ATO has been clear that its position on section 100A does not depend on the outcome of Bendel. That risk sits independently of the case, and it remains active.
The practical implication is straightforward. The Bendel decision is good news. It removes one layer of risk that has hung over trust structures for more than a decade. But it is not a signal to stop documenting distributions carefully, or to assume that all historical unpaid entitlement arrangements are now completely safe.
Anyone who has received amended assessments from the ATO on the basis of Division 7A and unpaid present entitlements should be speaking to their accountant about lodging an objection. That is a genuine option following this decision.
Anyone who has been managing unpaid present entitlements on formal Division 7A loan terms should review whether those arrangements remain necessary, and what the implications of unwinding them might be.
What to Do Next
The Bendel decision creates a window of opportunity. But acting on it without professional advice is not the right call. The tax law around trusts, particularly the interaction between Division 7A, section 100A and the new minimum 30 per cent trust tax announced in the 2026-27 federal budget, is more complex than any single case can resolve.
The right move is to bring this case to your accountant’s attention and ask two specific questions. First, do you have any historical unpaid present entitlement arrangements that were assessed or adjusted by the ATO under Division 7A? If so, an objection may now be available. Second, does the Bendel outcome change any current planning decisions around how trust income is distributed to corporate beneficiaries?
The answer to both questions will depend entirely on your specific structure and circumstances.
| THE GOOD BUILDER TAKE The Bendel case ending in the taxpayer’s favour is a genuine win. For over 15 years, the ATO imposed compliance obligations on trust distributions to corporate beneficiaries that a court has now confirmed were not legally required. For builders and tradies running trust structures, this is worth knowing. It reduces one area of risk and may open the door to reviewing historical tax positions. But the surrounding environment is still complex. The 2026-27 federal budget introduced a minimum 30 per cent tax on discretionary trust distributions starting 1 July 2028. Section 100A integrity provisions remain active. The rules around trust structures are changing, not simplifying. Get proper advice. Not next year. Now. |
More ATO news: If Your Construction Business Runs Through a Discretionary Trust, the Tax Rules Are Changing. Here Is What You Need to Know.
Disclaimer: This article draws on publicly available court records, ATO statements and professional accounting commentary. It is provided as editorial information only and does not constitute financial, legal or tax advice. Readers should seek qualified professional advice specific to their individual circumstances.
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