Our Recent Takes on Tax: Key Insights from DBS

Bendel Decision & Division 7A: What Trusts and Companies Need to Know

The recent Bendel decision has shaken up the landscape for family trusts and private companies across Australia. The Full Federal Court found that unpaid present entitlements (UPEs) to corporate beneficiaries are not automatically considered loans under Division 7A—unless there’s an obligation to repay, not just to pay. This challenges the Australian Taxation Office’s (ATO’s) long-standing approach and has significant implications for over 800,000 discretionary trusts. However, the story isn’t over: the ATO has been granted special leave to appeal the Bendel decision to the High Court  and, for now, continues to treat UPEs as Division 7A loans for compliance purposes. Trustees should also be mindful of Section 100A, which could see distributions taxed at 45% if companies don’t genuinely benefit. The key takeaway? Don’t make hasty changes. Instead, review your structures, monitor legal developments, and factor in the 8.77% Division 7A benchmark interest rate when considering dividend deferral strategies. Staying alert is essential as the High Court’s decision could reshape trust and company tax planning.

Franking Credits & New Corporate Beneficiaries: ATO Scrutiny Intensifies

Trustees and advisers should be alert to the ATO’s latest focus on franking credits for new corporate beneficiaries. The issue centres on the 45-day holding period rule: if a company is set up after a franked dividend is declared, it may not qualify for the credits, even if the trust has held the shares for years. The ATO’s position is clear—newly incorporated companies are unlikely to meet the eligibility criteria, meaning franked dividends could be taxed as unfranked and lead to double taxation within the group. It’s crucial to review your trust and company structures and avoid distributing franked dividends to companies established after the shares go ex-dividend. Specialist advice is essential in this evolving area, as the ATO’s guidance continues to develop.

ATO Tax Debts: Why Using the ATO as a “Bank” Is Riskier Than Ever

Australian businesses are facing unprecedented scrutiny as the ATO cracks down on unpaid tax debts, which have soared to $105 billion. The days of using the ATO as a de facto business bank are over. The ATO is deploying a range of enforcement tools, from Director Penalty Notices and garnishee orders to debt collection agencies and even travel bans for significant debts. New rules from 1 July 2025 mean the GIC and SIC on tax debts will no longer be tax deductible, making unpaid tax even more costly. To stay ahead, businesses must keep management accounts up to date, lodge all returns on time, maintain cash flow forecasts, and engage proactively with the ATO if cash flow is tight. Proactive management is now essential to avoid serious consequences for both companies and directors.

EOFY Tax Tips: Don’t Fall for Social Media “Hacks”

As the end of financial year approaches, social media is awash with so-called tax “hacks”—from claiming designer handbags as work bags to listing your pet as a guard dog. While these tips might sound tempting, they rarely stand up to ATO scrutiny and can lead to severe penalties. The reality is that tax law is complex and highly individual. The ATO uses advanced technology to detect suspect claims, and relying on advice from influencers or AI can be risky. To maximise your refund safely, keep thorough records, maintain logbooks for car claims, track work-from-home hours, and always consult a registered tax agent. Remember, your tax affairs are your responsibility—don’t risk your refund or reputation on dodgy advice.

Ready for Tailored Tax Advice?

At DBS, we keep you ahead of the curve on tax risks and opportunities, from trust distributions and franking credits to compliance and payroll changes. For personalised guidance that protects your interests and keeps you compliant, get in touch with our team today. Let’s ensure your business and investments are future-ready—reach out for a confidential chat or follow us for more expert insights.