If you own a private company and it gets income from a trust, you may have heard about TD 2022/11 and the Bendel case. These rules affect unpaid trust distributions (UPEs) and could lead to extra tax.
In this blog, we will:
✅ Explain TD 2022/11 in simple terms.
✅ Break down the Bendel case and what it means.
✅ Give practical steps to avoid trouble with the ATO.
✅ Answer 10 common questions that people ask about these rules.
TD 2022/11 is a tax rule created by the Australian Taxation Office (ATO). It explains when an unpaid trust entitlement (UPE) becomes a loan under Division 7A.
🔹 A trust makes a profit and decides to give some of that profit to a private company.
🔹 But instead of paying the money, the trust keeps it and owes the company.
🔹 If the company doesn’t take the money, the ATO may treat it as a loan under Division 7A.
🔹 If it’s a loan without a proper loan agreement, the ATO can tax it as a dividend – which means extra tax for shareholders!
🔹 If the trust puts the UPE into a sub-trust, there is no issue unless:
👉 The big problem: The ATO assumes that any unpaid trust money is a loan unless the company takes action.
The Bendel case is important because it challenges TD 2022/11.
1️⃣ A trust distributed money to a private company but never actually paid it.
2️⃣ The private company didn’t ask for the money, so it stayed in the trust.
3️⃣ The ATO said this was a loan and taxed it under Division 7A.
4️⃣ Bendel disagreed and said, "Just because the money wasn’t paid doesn’t mean it’s a loan!"
✅ A UPE is not automatically a loan. The ATO must prove the company agreed for the trust to use the money.
✅ If the company doesn’t demand the money, that’s not enough to make it a loan.
✅ The ATO cannot assume all UPEs are loans under Division 7A without more evidence.
👉 Why does this matter?
🚨 The court’s decision makes it harder for the ATO to automatically tax UPEs as loans.
🚨 The ATO may need to change how TD 2022/11 is applied.
After the Bendel case, it’s unclear whether the ATO will change its rules or appeal the decision. But here’s how you can protect yourself:
✅ If your company is owed money by a trust, take action:
✅ Keep records:
✅ Be careful with sub-trusts:
✅ Talk to an accountant to see how this affects your business.
1. What is TD 2022/11?
It’s a tax rule that says if a trust owes money to a private company and the company doesn’t take the money, the ATO may treat it as a loan and tax it under Division 7A.
2. What is a UPE?
A UPE (unpaid present entitlement) is money that a trust owes to a private company but hasn’t actually paid yet.
3. Why does the ATO say an unpaid UPE is a loan?
The ATO assumes that if the company doesn’t take the money, it’s letting the trust use it, which means financial accommodation (a type of loan).
4. How does the Bendel case change things?
The court said a UPE is not automatically a loan. The company must agree for the trust to keep using the money.
5. Will TD 2022/11 change because of the Bendel case?
Maybe. The ATO might appeal the case or change its approach.
6. How do I avoid extra tax?
Either:
✔ Take the money from the trust, or
✔ Turn it into a formal 7-year loan agreement.
7. What if the trust puts the money in a sub-trust?
That’s fine as long as no one else uses the money. If the main trust uses the money, the ATO still sees it as a loan.
8. Does this rule apply to old UPEs?
🔹 TD 2022/11 applies to UPEs from 1 July 2022.
🔹 Older UPEs (before 1 July 2022) follow the old rules (PS LA 2010/4).
9. What happens if I ignore this?
🚨 If you do nothing, the ATO may treat your UPE as a "deemed dividend" and tax it at up to 47%.
10. What should I do next?
✅ Check your trust accounts.
✅ Decide if you will take the money or set up a loan.
✅ Talk to your accountant for advice.
The Bendel case challenges TD 2022/11, which means there might be changes ahead. But for now, the safest way to avoid extra tax is to:
✔ Withdraw the money OR
✔ Turn it into a proper loan under Division 7A.
👉 Have questions? Talk to your accountant today!
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