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Accountants may need to lodge objections for some clients following the Bendel decision but must first wait for further clarity from the ATO, BDO has advised.
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Practitioners left in ‘uncertain position’ as TR 2010/3 unravels
25 February 2025
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7 minute read
BDO partner of business services, Chris Balalovski, says practitioners are currently in a difficult position as clients look for clear advice on what they should do next following the outcome of the recent Bendel decision with the Commissioner yet to respond.
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The Full Court of the Federal Court dismissed the appeal by the Commissioner last week, determining that a loan, as defined in s 109D(3) for the purposes of Division 7A of the Income Tax Assessment Act 1936, requires a transaction which creates, or in substance effects, an obligation to repay an amount.
The court held that an unpaid present entitlement (UPE) owed by a trustee to a corporate beneficiary did not constitute a “loan”, nor a deemed dividend under Division 7A.
Balalovski said the Commissioner may simply decide to accept the decision and issue a decision impact statement.
"Given the extent of this practice over decades, the Commissioner could still try and turn to other mechanisms available to him within the law to try and strike down these arrangements. He may even look at Part IVA," he said.
"[Alternatively], the Commissioner may seek leave to appeal the decision in the High Court. However, the prevailing view is that because the decision from the Full Federal Court was unanimous and there's no dissenting decision that could be used as the basis for the application of the special leave, this would be difficult."
An application to seek leave to appeal the decision in the High Court would need to be lodged within 28 days of the decision.
Balalovski said where practitioners have clients with similar arrangements to those in the Bendel case and their returns have not yet been prepared, practitioners may want to wait for further clarity and certainty in relation to the Commissioner's response before acting.
"It would be advisable in cases where returns have been prepared and they've been prepared in a way that's consistent with the Commissioner's view, to look at lodging objections. However, they should also wait until we have certainty before doing that."
Institute of Public Accountants general manager of policy, Tony Greco, said some advisers would be "in a world of pain" as they try to work through the implication of the unravelling of a 15-year-old ATO tax ruling, TR 2010/3, and the void it has created in providing advice with so much uncertainty.
"In some cases, following the ATO ruling has the possibility of turning an unpaid present entitlement (UPE) which would otherwise not be a loan as result of recent Full Federal Court decision into a loan," Greco said.
"The only certainty we have is that the ATO is reviewing its decision impact statement."
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