Division 7A After Bendel: UPEs, Minimum Repayments and Tax Risks in 2026

August 6, 2026

Introduction

Right, this one’s a big deal. And not just for tax nerds.

On 10 June 2026, the High Court of Australia handed down its decision in Commissioner of Taxation v Bendel [2026] HCA 18. In a 5-2 majority, it dismissed the ATO’s appeal, meaning unpaid present entitlements (UPEs) from trusts to corporate beneficiaries are not loans under Division 7A.

For roughly 15 years, the ATO had been running a different position. And in that 15 years, a very large number of Australian family groups, businesses, and trust structures were set up on the assumption that UPEs were loans (or would become loans) under Division 7A.

Now the rules have shifted. Kind of.

Because here’s the twist. Even though UPEs to bucket companies aren’t Division 7A loans anymore, there are still plenty of other tax provisions circling around them. Subdivision EA. Section 100A. The proposed 30% minimum tax on discretionary trusts announced in the 2026–27 Federal Budget, scheduled to apply from 1 July 2028 subject to final legislation and implementation details.

Translation? The dust hasn’t settled. And for anyone with a private company or a trust with a corporate beneficiary, this is not the time to sit back and assume it’ll all work out.

At Hughes O’Dea Corredig (HOC), we’ve been fielding a heap of questions about this since the ruling landed. So let’s break down what the Bendel decision actually means, what still applies, and what you should be reviewing right now.

The Quick Version

Strip it right back and here’s what Division 7A after Bendel looks like:

The Bendel ruling: UPEs from trusts to corporate beneficiaries are not “loans” under Section 109D of Division 7A. A 15-year ATO position has been overturned.
What Bendel doesn’t change: Division 7A still applies to actual loans from private companies to shareholders or associates. Minimum repayments, complying loan agreements, benchmark interest rates; all still very much in play.
What still catches UPEs: Subdivision EA, which may apply to payments and loans made by a trust with an unpaid corporate UPE; Section 100A, the reimbursement-agreement provision; and the proposed 30% minimum tax on discretionary trusts from 1 July 2028.
The Division 7A benchmark rate: Set annually. The 2025-26 rate is 8.77%, up from previous years, and rates for 2026-27 will follow.
What most families should be doing right now: What most families should be doing right now: Review their historical documentation. Model whether existing loan arrangements should be retained or restructured. Assess potential Subdivision EA and Section 100A exposure.

Here’s the big-picture takeaway. Bendel is a taxpayer win. But treating it as a green light to do nothing is a genuinely bad idea.

Why Family Groups Are Feeling Confused

Look, this is one of those situations where a technical tax change reshapes years of planning. And plenty of business owners are quietly wondering where they stand.

Here’s the kind of conversations we’ve been having on repeat.

“So do I still need my Division 7A loan agreement in place?” If it’s for an actual loan from the company to a shareholder or associate – absolutely. Bendel only touched UPEs. Every other part of Division 7A is unchanged.

“What about my old UPEs from 2015? Are they safe now?” Possibly. But you need to look at whether Subdivision EA or Section 100A could still apply. Just because it’s not a Division 7A loan doesn’t mean it’s tax-free.

“I’ve been making minimum repayments on my UPE loan every year; should I stop?” Bad idea to just stop without advice. If a proper Division 7A loan agreement was put in place, that agreement is still binding. You may have options, but the wrong move could trigger consequences.

“My accountant told me to convert all UPEs into complying loans years ago. Do I unwind that?” This is a genuinely complex one. In some cases, restructuring may make sense. In others, the loan is worth keeping in place. Case by case.

“What’s happening with this 30% trust tax I’ve been hearing about?”That’s the 2026–27 Federal Budget announcement proposing a 30% minimum tax on discretionary trusts from 1 July 2028. It is separate from Bendel, but its interaction with UPEs and trust structures must still be considered.

“I’ve got a bucket company sitting on years of UPEs; do I have exposure?” Very possibly. Depends on how those UPEs have been treated, whether the funds have been used, and whether earlier lodgements relied on the old ATO position.

Genuinely, this is not one to muddle through alone. A proper sit-down with a Division 7A accountant in Melbourne will save you a lot of grief.

So What Actually Is Division 7A?

Let’s back up a beat.

Division 7A is a set of anti-avoidance rules in the Income Tax Assessment Act 1936. Its whole job is to stop private company owners from pulling money out of their company tax-free.

Without Division 7A, you could take a “loan” from your own company, never repay it, and effectively access the company’s profits without paying dividend tax.

To stop that, Division 7A treats certain payments, loans, and debt forgiveness as deemed dividends. It means they get taxed in the hands of the shareholder (or associate) as if they were an actual dividend, but often without franking credits attached. Which makes them expensive.

Here’s how it works in practice:

A private company makes a payment, loan, or forgives a debt to a shareholder or associate
If certain conditions aren’t met, the amount is deemed to be an unfranked dividend
That amount is included in the shareholder’s assessable income
Tax is payable at the shareholder’s marginal rate, up to 47%, with no franking offsets

How to avoid a deemed dividend:

You put the loan on a complying Division 7A loan agreement (also called a Section 109N agreement). This means:

A written agreement in place before the company’s tax return is lodged
A maximum loan term of 7 years unsecured or 25 years secured
Interest charged at least at the Division 7A benchmark interest rate each year (currently 8.77% for 2025-26)
Minimum yearly repayments (MYR) paid every year for the life of the loan

Miss any of these and you’ve got a problem. The whole amount can become a deemed dividend.

What the Bendel Decision Actually Changed

Now for the main event.

For 15 years, the ATO’s position, set out in Taxation Determination TD 2022/11 and its predecessors, was that a trust’s failure to pay a UPE to a corporate beneficiary amounted to “financial accommodation”. Financial accommodation is included in Division 7A’s extended definition of a “loan”.

Which meant, in the ATO’s view, that every unpaid UPE to a bucket company needed to be either:

Paid out to the corporate beneficiary within specific timeframes, or
Placed on a complying Division 7A loan agreement (with minimum repayments and benchmark interest)

If neither happened, the UPE was treated as a deemed dividend.

For a decade and a half, this shaped how thousands of Australian family groups operated their trusts and bucket companies.

Then along came Bendel.

The Bendel matter went through the Administrative Appeals Tribunal (2023), the Full Federal Court (February 2025), and finally the High Court (June 2026). At every stage, the taxpayer won.

The High Court’s 5-2 majority ruling confirmed:

A UPE, on its own, is not a “loan” for Division 7A purposes
Failing to call for payment doesn’t constitute “financial accommodation” under Section 109D
The ATO’s 15-year position was wrong

Big win for taxpayers. Full stop.

But here’s why nobody’s popping champagne just yet.

Why the Ruling Isn’t the Green Light Some Think It Is

There are three big reasons why treating Bendel as “all clear, do nothing” is risky.

1. Subdivision EA is still very much alive

Subdivision EA is separate from the Section 109D loan question that Bendel dealt with. It captures situations where a trust with an unpaid UPE to a company makes a payment or loan to a shareholder of the corporate beneficiary (or their associates).

In plain English, if your bucket company has a UPE, and the trust then lends money to you or a family member, that arrangement can still trigger deemed dividend consequences. Bendel didn’t touch this.

2. Section 100A is watching everything

We’ve written about Section 100A before in our trust distribution minutes piece. It’s an anti-avoidance rule that catches “reimbursement agreements”, where a beneficiary is presently entitled on paper but somebody else actually gets the benefit.

The ATO can use Section 100A to attack UPE arrangements where the underlying funds are being used by someone other than the entitled beneficiary. There’s no statutory time limit on Section 100A amendments either. Genuinely scary.

3. The 30% minimum trust tax is coming

The 2026-27 Federal Budget announced a proposed 30% minimum tax on around 840,000 discretionary trusts, expected to start from July 2028. This applies to trust income that isn’t distributed and taxed at higher rates. It’s still in consultation, but it’s real, it’s coming, and it’s a game-changer for family trust planning.

Add all three of those together and what looks like a taxpayer win at first glance becomes a “watch this space” moment.

For anyone serious about Division 7A tax risks Australia, this is a moment to reassess. Not disengage.

How Division 7A Loans Actually Work in Practice

Even setting UPEs aside, Division 7A applies to actual loans made by private companies. Here’s a quick refresher on how those loans work.

Step 1: The company lends money to a shareholder or associate

Doesn’t need to be a formal loan. Can be by directors’ resolution, a debit balance in a loan account, even a payment on the shareholder’s behalf. All potentially caught.

Step 2: A complying Section 109N agreement gets put in place

This has to be:

In writing
Signed before the earlier of the company’s tax return lodgement date or the actual lodgement
Setting a maximum loan term (7 years unsecured, 25 years secured)
Charging at least the benchmark interest rate

Step 3: Minimum yearly repayments start

The MYR is calculated using an ATO formula that ensures the loan is fully repaid within the term. Miss the MYR for any year and the shortfall becomes a deemed dividend that year.

Step 4: The loan runs its course

Each year, the MYR is recalculated. Interest is charged at that year’s benchmark rate. Repayments are made, either as cash payments, or as dividends declared and offset against the loan (which is a common strategy).

Step 5: The loan is fully repaid

Once repaid, everyone breathes out.

Quick example

Meet “Ashley”, who borrowed $500,000 from his family’s private company on 1 July 2025. He signed a 7-year Division 7A loan agreement at the 2025-26 benchmark rate of 8.77%.

For 2025-26, his minimum yearly repayment is approximately $99,000. He can pay this in cash, or the company can declare a dividend that offsets against his loan account. Either way, he needs it done by 30 June 2026.

If Ashley misses even $1,000 of that MYR? That $1,000 becomes a deemed dividend, taxed at Ashley’s marginal rate (potentially 47%) with no franking credit.

Get it right and Ashley has a legitimate way to access family company funds over time. Get it wrong and it’s an expensive mistake.

Want your Division 7A position properly reviewed? A confidential chat with our tax planning team is genuinely the fastest way to know where you stand.

Your Division 7A Post-Bendel Checklist

Bookmark this. Here’s the checklist we’re using with family groups and business clients right now.

1. Review every existing UPE arrangement

If you’ve been treating UPEs as Division 7A loans based on the ATO’s old position, we need to look at whether they still need to be. In some cases, they can be unwound. In others, keeping them in place is the safer play.

2. Confirm which UPEs are potentially exposed to Subdivision EA

Look at whether the corporate beneficiary’s UPE has been “used” by the trust to fund payments or loans to shareholders. If yes, Subdivision EA may still apply.

3. Review Section 100A exposure

Where UPEs went to bucket companies with money actually flowing to individuals in the family, Section 100A risk is real. Get this reviewed properly.

4. Get all Division 7A loan agreements in order

For every actual loan from a private company to a shareholder or associate, is there a written Section 109N agreement? Is it signed and dated properly? Does it comply with the benchmark rate for that year?

5. Track minimum yearly repayments

Check every year, for every loan. Missed MYR = potential deemed dividend. It’s that simple.

6. Plan for the 2026-27 benchmark interest rate

The benchmark rate for 2025-26 is 8.77%. The 2026-27 rate will be published by the ATO in June/July 2026. Your MYR calculations need to reflect the current-year rate.

7. Think about your bucket company strategy

If you’ve historically directed trust income to a bucket company as a tax-planning move, Bendel might change the calculus. But before making any changes, consider Subdivision EA, Section 100A, and the incoming 30% minimum trust tax.

8. Coordinate Division 7A with your broader tax plan

Division 7A doesn’t sit on its own. It interacts with trust distributions, franking credits, dividend planning, and estate planning. Any decision needs to be made in that broader context.

9. Wait for the ATO’s Decision Impact Statement

The ATO is expected to release a revised Decision Impact Statement responding to the High Court ruling. Until that lands, don’t make drastic moves without advice; the transitional treatment could matter.

10. Get it reviewed by someone who genuinely gets this

Division 7A is one of those areas where a general-practice accountant might not have the depth. Get someone who specialises in a family group and trust taxation to run the ruler over your setup.

Honestly, an ATO director penalty notice review or Division 7A review is one of the best value tax investments you can make right now.

Common Mistakes and Myths Doing the Rounds

There’s a lot of confusion out there post-Bendel. Let’s clear up the biggest ones.

Myth 1: “Bendel means Division 7A doesn’t apply to family trusts anymore.”

Wrong. Bendel only decided that UPEs aren’t loans. Actual loans from private companies to shareholders or associates are still fully caught. Nothing about the core Division 7A regime changed.

Myth 2: “I can just stop paying my Division 7A loan minimum repayments now.”

Definitely not. If you’ve got an actual Division 7A loan agreement in place, it’s still binding. Missed MYRs still trigger deemed dividends. Bendel doesn’t change any of that.

Myth 3: “My old UPEs are safe now; no more tax risk.”

Not necessarily. Even if a UPE isn’t a Division 7A loan, it can still trigger Subdivision EA, Section 100A, or issues under the incoming 30% trust tax.

Myth 4: “I don’t need a Division 7A loan agreement anymore for future UPEs.”

For future UPEs, technically correct in most cases. But before making that call, look at the broader picture like how the trust will use the money, whether Subdivision EA applies, whether the ATO’s revised guidance changes the analysis.

Myth 5: “The ATO will just accept the ruling and move on.”

They will accept the ruling – the High Court is final. But they’ll almost certainly find other angles. Expect more focus on Section 100A, Subdivision EA, and the practical implementation of the trust tax reforms.

Myth 6: “I can convert my old UPE loans back to plain UPEs and save on MYR payments.”

Maybe. But it’s not automatic and there are technical steps. Get this properly modelled before you unwind anything.

When to Take Action

The clear answer? Sooner rather than later. But not without proper advice.

Take action now if:

You’ve got a private company that’s made loans to shareholders or associates
You’ve got trust structures with corporate beneficiaries and UPEs on the books
You’ve been running bucket company strategies as part of your tax planning
You’ve had Division 7A loan agreements in place for existing UPEs
You’re a director or trustee of a family group structure
You’re facing decisions about trust distributions for 2026 or 2027

Treat it as more urgent if:

You’ve got a decade or more of unpaid UPEs sitting on the books
Your trust has been using UPE funds to make payments to family members
You’ve received any ATO contact about UPEs, Division 7A, or Section 100A
Your corporate beneficiary’s UPE balance is substantial (six figures or more)
You’re planning a major family group restructure or business sale
You’re transitioning family businesses through succession planning

The cost of getting Division 7A wrong is genuinely brutal. Deemed dividends at marginal rates. No franking credits. Interest. Potential penalties. Not a fun conversation to have.

A proper Division 7A tax advice Melbourne session is honestly one of the highest-ROI things you can do right now.

How HOC Helps Family Groups Navigate Division 7A

This is where Hughes O’Dea Corredig fits in. We’re a Melbourne firm in Essendon, and family group taxation like private companies, trusts, bucket companies, Division 7A has been core to what we do for decades.

We’re not the kind of firm that puts a boilerplate loan agreement in place and never looks at it again. We’re the kind that reviews structures properly, keeps up with the case law, and understands how Division 7A interacts with the rest of your family’s tax picture.

Tax Planning and Compliance

Our tax planning team works across your full family group like trusts, companies, individuals to get Division 7A right, model the impact of the Bendel decision on your existing arrangements, plan your minimum yearly repayments, and coordinate everything with the rest of your annual tax strategy.

Business Advisory for Private Companies

For business owners running private companies, our business advisory practice helps you think through the strategic side. How to move money between entities. When to declare dividends. How to structure loans. Whether restructuring makes sense.

Estate Planning and Family Group Structuring

Division 7A doesn’t sit apart from the rest of your family’s plan. Our estate planning team makes sure the way your private companies, trusts, and family entities are structured actually holds up when you’re planning succession, wealth transfer, and long-term generational planning.

Whether you’re around the corner in Essendon or connecting with us remotely from anywhere in Australia, our team provides tailored UPE tax advice and Division 7A support in Melbourne that reflects the post-Bendel environment.

FAQs – Division 7A After Bendel

What is Division 7A and how does it work?

Division 7A is an anti-avoidance rule that stops private company owners from pulling money out of their company tax-free. It treats certain loans, payments, and debt forgiveness as deemed dividends, meaning they get taxed at the shareholder’s marginal rate, often without franking credits.

Are UPEs still Division 7A loans after Bendel?

No. The High Court’s decision in Commissioner of Taxation v Bendel [2026] HCA 18 confirmed that a UPE, on its own, is not a loan for Division 7A purposes. But other tax provisions viz. Subdivision EA, Section 100A can still apply.

Does Bendel apply to all UPEs?

Yes, in the sense that no UPE (on its own) is a Division 7A loan. But every UPE arrangement needs to be reviewed for other risks like Subdivision EA, Section 100A, and the incoming trust tax reforms.

When are Division 7A repayments due?

Minimum yearly repayments (MYRs) on complying Division 7A loans must be paid by 30 June each year. Miss the MYR for a financial year and the shortfall is treated as a deemed dividend for that year.

Can a Division 7A loan be repaid with a dividend?

Yes. Declaring a dividend and offsetting it against the loan balance is a common repayment method. But the tax consequences, paperwork and timing must be handled properly.

Who is an associate under Division 7A?

Broadly, associates include spouses, family members, trusts and companies controlled by a shareholder, business partners, and various other relationships. The definition is deliberately wide most family members and controlled entities are captured.

What happens if a Division 7A repayment is missed?

The shortfall (or the full amount, depending on the circumstances) can be treated as a deemed dividend for that year, taxed at the shareholder’s marginal rate without franking credits. It’s expensive.

What’s the Division 7A benchmark interest rate for 2026-27?

The 2025-26 benchmark rate is 8.77%. The 2026-27 rate will be published by the ATO before the start of the 2026-27 financial year. Your loan agreement needs to be updated each year to reflect the current rate.

Does Bendel change my need for a Division 7A loan agreement?

For actual loans from a private company to a shareholder or associate, the answer is no. A complying loan agreement may still be required to avoid deemed-dividend treatment. Bendel addressed UPEs to corporate beneficiaries, not ordinary company loans.

Why Our Advice Holds Up

Division 7A is technical, complex, and constantly evolving. Bendel just proved how much can change with one court decision. Getting it wrong is genuinely expensive.

Here’s why family groups across Melbourne keep coming back to Hughes O’Dea Corredig:

Decades of experience advising private companies, family trusts, and family groups on Division 7A, trust distributions, and complex tax structuring
Registered Tax Agents with current technical knowledge of the Bendel decision and its implications
Integrated team of tax, business advisory, SMSF, financial planning, succession, and estate planning all under one roof
Practical, no-jargon approach where we tell you what the rules actually mean for your family, not just what the textbook says
Active tracking of ATO guidance, Treasury releases, professional body updates from CPA Australia and CA ANZ, and case law developments

Reviewed by the HOC tax and business advisory team, August 2026. This article is general information only and doesn’t replace tailored tax or legal advice for your specific structure.

Your Next Step – Book a Division 7A Review

If you’re a director, shareholder, or trustee with any exposure to Division 7A or if the Bendel decision has left you unsure where you stand, the smartest move you can make is a proper conversation with someone who understands the new landscape.

Book your Division 7A review

Our team runs confidential Division 7A review sessions where we look at your existing loan agreements, review UPE arrangements, model Subdivision EA and Section 100A exposure, and put together a clear plan for the year ahead.

Call HOC on +61 3 9375 4286 or email mail@hoc.com.au to lock in a time.

Or have a look around first

Not quite ready to book? Take a browse through our tax planning services, business advisory practice, and estate planning support to see how we work.

Related Resources

Wrapping Up

Let’s bring this in for a landing.

The Bendel decision is genuinely a big deal. Fifteen years of ATO practice, overturned in one High Court ruling. For Australian family groups running private companies and family trusts, this is one of the most important tax developments in a decade.

But it is not a “do nothing” moment. Division 7A still applies to actual loans. Subdivision EA and Section 100A remain relevant. The 30% minimum tax applying to certain discretionary trusts from 1 July 2028 may also reshape future trust planning.

The families and businesses who come out of 2026 in good shape? They’re the ones who take the moment to properly review their structures. Reassess what’s still needed. Model the impact of both Bendel and the incoming changes. And plan properly.

The ones who assume it’s all fine now and let things drift? They’re the ones who’ll get a surprise letter down the track.

Don’t be in that second group.

Book your Division 7A and family group review with Hughes O’Dea Corredig and walk into 2026-27 with a plan that actually reflects the post-Bendel world.

Hughes O’Dea Corredig is a Melbourne accounting firm specialising in tax planning, business advisory, SMSF, financial planning, succession, and estate planning. Based in Essendon, we look after family groups, business owners, and private company shareholders across greater Melbourne and nationally via secure remote service.

Information in this article is general and current as of August 2026. Please get personalised tax and legal advice before making any decisions about your Division 7A position or family-group structure.

About Hughes O’Dea Corredig

Hughes O’Dea Corredig is a Melbourne-based accounting and wealth management firm with over three decades of experience helping individuals and businesses achieve financial freedom.

Our Core Services:
Wealth Management • Tax Advisory • Superannuation • SMSF Management • Business Accounting • Business Adviosry , Retirement Planning etc.

🌐 www.hoc.com.au | 📍 Level 2, 333 Keilor Road, Essendon VIC 3040 | 📧 mail@hoc.com.au

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