After the High Court’s decision in Commissioner of Taxation v Bendel [2026] HCA 18, an unpaid present entitlement your trust owes a bucket company is not, on its own, a Division 7A loan. As at October 2026 a pure unpaid entitlement left sitting does not need a complying loan agreement, but Subdivision EA, section 100A and any existing loans still bite.
If you run a trading business through a trust and sweep surplus profit to a bucket company, you have probably spent years being told the same thing: put every unpaid present entitlement on a complying Division 7A loan by lodgement day, or face a deemed dividend. In June 2026 the High Court changed that. I am Mina Baselyous, CPA, Chartered Tax Advisor and Registered Tax Agent at Pinnacle Accounting & Advisory in Melbourne, and this is what Bendel actually means for your structure, and the three traps that did not go away.
What the High Court actually decided in Bendel
In Commissioner of Taxation v Bendel [2026] HCA 18, decided on 10 June 2026, the High Court held that an unpaid present entitlement owed by a trust to a corporate beneficiary is not a loan for Division 7A purposes merely because it stays unpaid. Without bilateral dealing there is no provision of financial accommodation under section 109D(3)(b) of the Income Tax Assessment Act 1936.
This overturned the Commissioner’s long held position. In its Decision Impact Statement issued on 26 June 2026, the Australian Taxation Office confirmed it will withdraw its ruling on this point (TR 2010/3) and that the later determination governing entitlements from 1 July 2022 (TD 2022/11) will also be withdrawn. You can read the Commissioner’s guidance on Division 7A on the ATO website, and the governing law sits in the Income Tax Assessment Act 1936.
One important caveat: the High Court decided the case on its own facts. It is not a blanket ruling that every unpaid entitlement in every trust is permanently safe, and the ATO can still examine arrangements that go beyond a genuine entitlement simply left unpaid.
What this means for your bucket company UPE
For most established business owners the practical effect is this: a genuine unpaid present entitlement your trust owes your bucket company, left sitting as an entitlement, no longer needs to be put on a complying Division 7A loan agreement to avoid a deemed dividend. That removes the annual scramble to document loans and fund minimum repayments on money that never physically left the group.
The bucket company still caps the tax on surplus trust income at the company rate, 25% or 30% depending on whether it is a base rate entity, instead of the top marginal rate of 47% in an individual’s hands. Bendel does not change that benefit. What it changes is the compliance burden that used to sit behind it. In practice, says Mina Baselyous (CPA, CTA, Registered Tax Agent), the mistake we see most is owners treating Bendel as a green light to ignore their bucket company altogether. It is not.
The three traps Bendel did not touch
Bendel narrowed one path to a deemed dividend. It left three others fully open, and these are where the real risk now sits for a trust and bucket company structure.
1. Subdivision EA still applies
If your trust owes a bucket company an unpaid entitlement and the trust then pays money to, lends to, or forgives a debt of a shareholder of that company or their associate, Subdivision EA can still produce a deemed dividend. The entitlement being safe from section 109D does not make the downstream payment safe. This is the trap most likely to catch owners who relax after Bendel.
2. Section 100A still applies to reimbursement agreements
Section 100A sits entirely outside Division 7A and Bendel does not touch it. Where a trust distribution is part of a reimbursement agreement, the benefit flows to someone other than the beneficiary and the arrangement is not an ordinary family dealing, the trustee can be taxed at the top marginal rate with no time limit. Genuine distributions that are actually enjoyed by the beneficiary are the protection here.
3. Money actually drawn from the trading company is still a loan
If a shareholder or associate actually takes money out of the trading company, through drawings, personal expenses paid by the company, or a director loan, that is still a straight Division 7A loan under section 109D and Bendel changes nothing. As at the 2026-27 income year the Division 7A benchmark interest rate is 8.77%, and these loans still need a complying agreement and minimum repayments.
Not sure whether Bendel helps your structure or exposes a trap in it?
At Pinnacle Accounting & Advisory, we review trust and bucket company structures for Melbourne business owners and map exactly where Division 7A, Subdivision EA and section 100A still apply. Book a consultation with Mina to find out where you stand.
Book a ConsultationDo not tear up your existing Division 7A loan agreements
If you have already converted past entitlements into complying Division 7A loans, Bendel does not unwind them. A loan on section 109N terms remains a loan, and it must keep being serviced with minimum repayments and benchmark interest until it is repaid. The decision affects how you treat entitlements going forward, not loans you have already locked in.
Unwinding or ignoring an existing loan without advice can trigger the very deemed dividend you spent years avoiding. This is a classic case where the right move depends entirely on your specific history, which is why we work through each entitlement and loan year by year with clients before changing anything.
What established business owners should do now
The sensible response to Bendel is not to celebrate or to panic, it is to review. Confirm which of your corporate beneficiary entitlements are genuine and simply unpaid, check whether any downstream payments trigger Subdivision EA, make sure your distributions are real and defensible against section 100A, and keep servicing any existing complying loans. For most owners that is a planning conversation, not a compliance emergency.
It also matters that there is, as at October 2026, no legislative change and no announced measure to reverse Bendel. Treasury could propose law at any time, so the safe approach is to plan with your adviser and avoid locking in anything you cannot reverse. This sits squarely inside the proactive tax planning work we do through the year, and it connects to the wider questions of how you use a bucket company, how a unpaid present entitlement is treated, and how your overall Division 7A position hangs together.
Frequently Asked Questions
Does my bucket company UPE still need a Division 7A loan agreement after Bendel?
As at October 2026, a pure unpaid present entitlement your trust owes a corporate beneficiary is not a Division 7A loan after Commissioner of Taxation v Bendel, so it does not need a complying loan agreement on its own. The ATO has said it will withdraw TR 2010/3 and TD 2022/11. Other rules can still apply, so get advice before changing anything.
Does Bendel mean I can ignore my bucket company entitlements?
No. Bendel only decided that an unpaid entitlement, left unpaid, is not a Division 7A loan. Subdivision EA, section 100A and Part IVA still apply, and if the trust later pays or lends that money to a shareholder of the company a deemed dividend can still arise. Treat the entitlement as real, not as something to ignore.
I already put my UPE on a complying loan. Can I unwind it?
Generally no. The High Court decision does not convert an existing complying Division 7A loan back into an unpaid entitlement. If you already put a UPE on section 109N terms, it remains a loan and must keep being serviced with the minimum repayments and benchmark interest. Speak to your adviser before stopping any repayments.
Is money I draw from my trading company still caught by Division 7A?
Yes. Money actually taken out of your trading company by a shareholder or their associate is still a straight Division 7A loan under section 109D. Bendel changed nothing about that. The 2026-27 benchmark interest rate is 8.77%. Director loans, personal expenses paid by the company and drawings all still need managing.
Will the government change the law to overturn Bendel?
Possibly, but as at October 2026 there is no legislative change and no announced measure to reverse Bendel. The ATO has published a Decision Impact Statement and is withdrawing its rulings. Treasury could propose law at any time, so the safe approach is to plan with your adviser and avoid locking in anything you cannot reverse.
General Advice Disclaimer: The information in this article is general in nature and does not constitute personal financial, tax, or legal advice. It has been prepared without taking into account your personal objectives, financial situation, or needs. Before acting on anything in this article, consider its appropriateness to your circumstances and seek advice from a registered tax adviser or CPA. Liability limited by a scheme approved under Professional Standards Legislation.
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