The recent High Court decision has an important impact on small business groups that use discretionary trusts with corporate beneficiaries. In that landmark case (Tax Commissioner v Bender) on 10 June 2026, the court denied the Australian Tax Office’s (ATO’s) belief that unpaid present entitlements (UPEs) a trust owes a corporate beneficiary automatically becomes a loan back to the trust.

This is important because if the ATO treats a UPE as a loan there could be a tax bill under the rules of Division 7A. These rules apply to private companies that pay benefits, such as payments or loans, or forgive debts, to their shareholders

Why the court ruling matters

A lot of discretionary trusts form part of the structure of private business groups. The trust may distribute income to the company (referred to as a bucket company) but the money stays in the trust to fund future investment or as working capital. When money is owed to a beneficiary, but not paid, it becomes a UPE.

For the past 15 years, the ATO treated a UPE as a loan back to the trust and taxed it if there was not a formal loan agreement and regular repayments. This can increase the cost of compliance and administration while reducing the flexibility of cash flow.

The crux of the Bendel case against the ATO was that he kept income aside for many years for a related company. The company never asked for the funds, so they stayed within the trust and the ATO treated the unpaid amounts as loans and wanted Bendel to pay tax on the amount.

High Court decision

The High Court ruled against the ATO saying it was not a loan if an entitlement remains unpaid. It decided there has to be an obligation to repay money received as an advance. UPEs are not an advance and the company had simply not asked for their entitlement.

According to the High Court, providing finance or a loan is not the same as merely doing nothing. So the company’s entitlement is exactly that—an entitlement. It does not become a debt the trust needs to pay until the company requires the trust to pay the entitlement. Basically, the ATO was found to be wrong in its assessment and tax requirements on UPEs.

Whet this means for taxpayers

While this is a good outcome, it does not mean you can simply ignore unpaid entitlements. The June 2026 outcome rested on the fact the company never asked for payment and the specific wording in the trust deed. There are other tax rules that may apply. Whether or not you owe the ATO tax depends on individual circumstances.

With the government about to start taxing discretionary trust income at a minimum of 30% from 1 July 2028, the appeal of receiving income may be reduced. Now may be the time to consider your options.

All this makes UPEs and discretionary trusts and taxation complex. Contact Ben for more information about how it affects your trust and what you can do.

It is an unfortunate fact that child support is a key financial responsibility when parents separate or divorce. Normally one parent has their children more often than the other one. It is only natural that parents want to know how child support will affect them at tax time.

What child support is

Child support is what one parent pays to the other parent to contribute financially to their children’s needs. Services Australia (Child Support) manages it under the Child Support (Assessment) Act 1989. However, you can manage support payments without involving Services Australia but it is wise to keep good records.

The formula used to base child support payments on is as follows:

1.      The taxable income of both parents.

2.      How many and how old the children are.

3.      How often each parent cares for the children.

Is it taxable or a tax deduction

It is neither taxable or claimable as a tax deduction.

If you receive child support, you do not need to declare it as taxable income. This means there is no reduction in the amount of money you receive for your children.

When you pay child support, you cannot claim it as a tax deduction as the tax office considers it a personal obligation unrelated to work.

But child support can indirectly affect your taxes.

What are the tax implications?

Paying or receiving child support has other tax implications, including:

1.      Adjusted Taxable Income. The tax office uses Adjusted Taxable Income (ATI) to evaluate whether you qualify for government offsets and benefits. So if you pay child support, it reduces your ATI and this may affect whether you get the parenting payment, Family Tax Benefit (FTB) Part A or other government benefits.

2.      Family Tax Benefits. If you receive child support, it may reduce your FTB. However, this depends on how much child support you receive. The more you get, the less government support you may be eligible for.

3.      Making private arrangements. If you make private child support arrangements for your children when you separate from your partner, this can affect how the government assesses any benefits to which you are entitled. But it is still not taxable or claimable as a tax deduction.

Keep good records

It is important to keep good records if you receive or pay child support. Keep payment records such as receipts, payment transfers and statements from Services Australia. This will help if you receive a legal challenge and gives you accurate information for government departments assessing your eligibility for benefits.

No longer can holiday home owners claim lucrative tax deductions (such as rates, interest and insurance) if they block out peak holiday periods for personal use. The Australian Tax Office (ATO) tightened the tax deduction rules for holiday homes. It withdrew the previous rules on 12 November 2025, so you now have to prove the property is commercially available for rent as its primary use. This affects you if you own a rental that doubles as a holiday home.

What is the primary use of your rental property?

Previously you could claim deductions for expenses during the time you made the property available in the rental market even if you never rented it out. But you had to prove you made legitimate efforts to tenant the property. Those days are over.

The core question is – Do you use the property mainly to earn income?

The new ATO guidelines overturn a 40-year ruling and replace it with two Practical Compliance Guidelines, PCG 2026/2 and PCG 2026/3, and a new Taxation Ruling, TR 2026/1. These control when the tax office stops treating your holiday home as an income earning investment and flags it as a private investment. For example:

1.      Primary role is a rental investment. When you genuinely rent your holiday home out for most of the year, you can claim ownership costs like expenses, interest, rates, etc. But if you, your family and friends use it in the off season for a few weeks when there are no bookings, you cannot claim the expenses during those periods. You have to apportion your claim to exclude private use from what you claim as a tax deduction.

2.      Primary role is as a holiday home. If the primary use of your holiday home is for recreation for you, your family and friends, there is a significant tightening of the rules. You cannot claim ownership costs such as the decline in value, rates or interest. You can now only claim deductions for the costs associated directly with the rental of the property. These include advertising, platform commissions and cleaning fees for guest stays.

The new rules apply to short-term and long-term rentals, so this means the ATO is scrutinising online sharing and booking platforms, and includes the following:

·         Properties rented over the long term.

·         Leasing out whole recreational properties or holiday homes.

·         Leasing a spare bedroom in your house using an online sharing app.

Keeping records

The ATO is not going to spend compliance resources on meeting the new requirements for the year ending 30 June 2026 or earlier. However, if you own a holiday home you should keep good records that include:

·         Details of private and rental use.

·         Confirmation that you priced the rent at market value.

·         Proof of accepting and rejecting rental bookings.

·         Evidence that you did not block out times for personal use during peak holiday periods.

Do not let the new tax rules dictate the decisions you make about the use of your holiday home. If you bought it to enjoy, then concentrate on making priceless memories with your family rather than worrying about how much you can claim as tax deductions.

Talk to Ben about the new ATO guidelines for holiday homes and how you can financially maximise your investment.

Things happen. A Capital Gains Tax (CGT) asset can become lost or destroyed or partially destroyed through fire, flood or theft, for example. So what are the implications?

If this happens, you can choose to roll over your CGT liabilities. You can also roll over your CGT if you lose an asset because of fraud or if it is stolen. But you can no longer roll the CGT over if your broker sells your shares by mistake.

While you think you would not owe CGT in these circumstances, you do. Why? Because the ATO considers ownership of the asset changed. It does not matter if the asset is destroyed or lost or whether it was outside your control or accidental. In these scenarios you can use the CGT rollover that covers accidentally lost or destroyed assets. Whatever you do, do not ignore it.

However, you need to meet the conditions before you can apply the rollover.

Rollover conditions

There are strict conditions you need to meet to roll over CGT. The most important one is whether you receive a payout, such as insurance, or a replacement asset. Where you receive money, you need to use it to replace the asset within a certain time. If you do this, the ATO disregards the capital gain it assesses you made as a result of the destruction or loss of the asset. It regards the replacement to have cost the same as the original asset for the sake of CGT.

There are other rules surrounding the receipt of money to compensate for the loss or damage of an asset. For example, if you only spend some of the compensation or more than you received to replace the asset, you could have to pay CGT immediately or there may be other adjustments you are liable for.

If the original asset was bought before CGT was introduced (20 September 1985), the ATO considers that its replacement was also acquired before that date. But there are conditions such as the replacement asset must be almost the same as the original.

How the rollover rules affect you will depend on your circumstances. These rules are complex and you really should seek an expert’s advice.

If you lose an asset that is subject to CGT, do not just do nothing or assume you no longer have to pay CGT. Contact Ben for advice on the situation. He can guide you to keep you out of trouble with the tax office.