Bendel Appeal Presented Before High Court

The High Court of Australia recently took up the appeal case of Commissioner of Taxation of the Commonwealth of Australia v. Bendel & Anor. This appeal, heard on October 14, 2023, followed a significant ruling by the Full Federal Court from June 2025, which sided with taxpayer Steven Bendel.

Bendel’s Case Background

The Full Federal Court’s decision held considerable weight as it challenged the Australian Taxation Office’s (ATO) established views regarding unpaid present entitlements (UPEs) owed to corporate beneficiaries. It specifically ruled that a UPE related to trust income was not classified as a loan under Division 7A of Part III of the Income Tax Assessment Act 1936. This conclusion directly opposed the ATO’s position outlined in Taxation Determination TD 2022/11.

Impact on Taxation Procedures

This case has garnered attention within the tax community, potentially reshaping how UPEs are administrated under Division 7A. The ATO indicated that it would uphold its stance as described in TD 2022/1 until the High Court reached a final judgment on the appeal.

Arguments at the High Court

During the hearing, the Commissioner of Taxation maintained that the Full Court erred in its interpretation of section 109D(3). The Commissioner argued that the interpretation limited scenarios to instances where an initial payment was made by a private company with an obligation to repay. They contended that the provision of credit or financial accommodations does not always follow this pattern.

• Bendel’s company, Gleewin Investments, purportedly received financial accommodation under section 109D(3)(b).
• The Commissioner claimed this arrangement allowed Gleewin to utilize amounts it could withdraw.
• Furthermore, it was asserted that the situation effectively constituted a loan of money.

Bendel’s Defense

On the other hand, Steven Bendel countered the Commissioner’s appeal, stating it faltered in both legal and factual aspects. Both parties recognized that section 109D(3) expands the definition of ‘loan’ beyond the ordinary interpretation. However, they disagreed about the extent of this expansion.

• Bendel argued that section 109D(4) does not imply that a loan can be created without an initial, repayable payment.
• He further asserted that there was no agreement for the 2005 Trust to hold or delay payment for the amounts due to Gleewin Investments.
• According to Bendel, the trust deed did not specify a due date for payment, indicating no true deferral existed.

Looking Ahead

Although a timetable for the High Court’s ruling is not established, a final decision is anticipated in the first half of 2026. The outcome of this case will likely have a lasting influence on the application and understanding of UPEs in the Australian tax landscape.