August Tax & Accounting Update: New Rules, Key Deadlines & What to Do Now
- 4 days ago
- 5 min read
Topics Covered
Trust Distributions and Division 7A loans
In June 2026, the High Court rejected the ATO’s long-standing view that an unpaid distribution owed by a trust to a corporate beneficiary will automatically constitute a loan for the purpose of the integrity rules in Division 7A.
The rules in Division 7A are aimed at situations where private companies provide benefits to shareholders or their associates in the form of payments, loans or forgiven debts. When these rules are triggered the tax rules apply as if the company had paid an unfranked dividend to the recipient of the benefit.
Why this matters
Many private business groups use discretionary trusts as part of their structure. It is common for a trust to distribute at least some income to a corporate beneficiary so that this income can be taxed at the corporate tax rate (currently 25% or 30%), while the cash remains within the trust to fund working capital, future investment or business growth.
Until now, the ATO's view was that these unpaid distributions would typically be treated as loans under Division 7A. This often meant businesses needed to put complying loan agreements in place, charge benchmark rates of interest and make annual repayments to avoid the risk of deemed unfranked dividends being recognised for tax purposes. For many groups, this created an additional administration burden, reduced cash flow flexibility and increased compliance costs.
The High Court has now clarified that an unpaid distribution will not necessarily amount to a Division 7A loan simply because the corporate beneficiary has not demanded payment.
While every arrangement will depend on its particular facts, the decision is likely to provide greater certainty for many business groups that have historically retained funds within their trusts.
What happens with existing loan arrangements?
The ATO has since released a Decision Impact Statement (26 June 2026), confirming that it will generally administer the law in accordance with the Court's decision, while also highlighting that other integrity provisions may still need to be considered.
One of the key things that the ATO has clarified is that where formal written loan agreements have been put in place in response to the ATO’s previous views in this area, these can’t simply be unwound just because of the High Court decision.
That is, the trust still needs to make minimum loan repayments each year until the loan period ends or the loan is completely repaid to prevent a deemed unfranked dividend from being recognised under the tax rules.
Other tax rules still matter
Although the decision represents a significant development, it should not be viewed as removing all Division 7A or tax related concerns.
The ATO has made it clear that other provisions within Division 7A can still apply in certain situations. For example, if a trustee appoints income to a corporate beneficiary and this is left unpaid, but the trustee subsequently lends money to a shareholder of the company (or an associate of a shareholder), then this can potentially still trigger a deemed unfranked dividend for tax purposes unless appropriate steps are taken.
Other integrity rules also need to be considered when trust distributions are left unpaid. For example, the rules in section 100A can potentially trigger adverse tax outcomes in situations where a trustee appoints income to a beneficiary but the real benefit of the funds is enjoyed by another party.
These provisions remain highly fact-dependent, making it important to review arrangements carefully rather than assuming the Bendel decision resolves every issue.
Looking ahead
The decision provides a timely opportunity for private groups to review their trust structures, distribution resolutions and patterns, accounting records and the way unpaid entitlements have been managed over time.
Trust Distributions to Corporate Beneficiaries also known as “bucket companies”
We also need to keep an eye on the Government's proposed trust tax reforms.
The Government announced in the recent Federal Budget that it will be introducing a 30% minimum tax rate for discretionary trusts from 1 July 2028. The Government has also indicated that income distributed by discretionary trusts to corporate beneficiaries will generally be subject to double taxation because companies won’t receive a credit for the tax that is paid at the trust level on its income.
This is likely to significantly reshape tax planning strategies over the coming years.
A recent consultation paper released by Treasury in connection with the proposed 30% minimum tax rate also suggests that the Government might modify the tax rules to ensure that Division 7A can apply to unpaid distributions. This isn’t law yet, so we will need to monitor developments because this could mean that tax planning strategies need to be revisited before we reach 1 July 2028.
Please let us know if you would like to discuss how the Bendel decision and proposed 30% minimum tax on discretionary trust income will impact on your group.
New AML/CTF Obligations
AML/CTF Update – Identity Verification – mandatory requirements
As part of the recent changes to Australia’s AML/CTF obligations for tax practitioners and other designated services, we have implemented a new identity verification process to help us meet our obligations. We have partnered with easyAML to securely perform the required identity checks as part of our onboarding and entity establishment process.
From 1 July 2026, all new clients and existing clients establishing new entities will be required to complete this verification process before we can commence providing services or proceed with the implementation of a new entity. The process is designed to be straightforward and secure, and we will provide clear instructions when the verification is required.
The outcome of the process is to be retained by us (via easyAML) for 7 years to meet our obligations.
This is now a legal requirement.
Austrac have been mandated to oversee, audit and impose penalties for any failure on our behalf to implement these measures.
Tips to meet the Payday Super 7 Day Timeframe
The ATO also said that it understands it may take time to adjust to this new requirement and that employers who genuinely try to do the right thing will not be the focus of its compliance action in the first year.
The ATO has released tips to follow to help ensure super reaches your employees’ super funds within 7 business days after payday.
These tips are:
check the super fund will accept payments;
monitor your payments;
know where to find errors and how to fix them;
check your payroll provider supports payday super;
and keep up to date.
Directors ID’s: a new reporting requirement is coming
From 1 July 2027, companies will have a new obligation when it comes to Director Identification Numbers (Director IDs).
If you are a company director, or you look after company compliance, now is a good time to make sure your records are in order.
From 1 July 2027, companies will need to provide their directors’ IDs to ASIC through the company reporting process. This will include processes such as annual reviews and notifying ASIC of changes to director details.
The change is designed to improve the accuracy and integrity of Australia’s company register, helping ASIC better identify directors and reduce the risk of fraudulent or fictitious identities being used in company structures.
What should you do now?
We encourage you to do these three things as soon as possible, and our team is available to assist:
check that all current directors have obtained a Director ID;
confirm that the director details held by ASIC are accurate; and
ensure your company’s records and compliance processes are ready for the new reporting requirement.
The good news? Getting organised now should make the transition to the new requirements much easier.
Further practical guidance is expected from ASIC and the ABRS before the changes commence, so keep an eye out for updates as we get closer to July 2027.
For more Information:
If any of the above raises questions for you or your business, please contact our office.
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