A Bentleigh building contractor sat down with us in July holding the same three pages his accountant sends him every year. A trust resolution, a loan agreement, and a repayment schedule for money that had never actually left his business. He asked the question a lot of owners quietly ask. Why do I keep signing this?
As of 10 June 2026, he may not have to.
That was the day the High Court decided a case called Bendel, unwinding sixteen years of accepted practice for family trusts that distribute profit to a private company. Sixteen days later the ATO confirmed it would withdraw the determination behind that practice. Few owners have heard about it, because the coverage has been written for tax specialists. These family trust tax changes affect an ordinary Melbourne arrangement: a trading trust, a company that takes part of the yearly profit, and a family that leaves the cash in the business.
What the High Court actually decided about your bucket company
Plenty of Melbourne businesses run through a discretionary trust. Each year the trustee decides who gets what share of the profit, and a common choice is to send part of it to a private company, often called a bucket company, so that slice is taxed at the company rate rather than someone’s top personal rate.
The cash usually stays put. The company is entitled to money it never actually receives, and that amount is called an unpaid present entitlement, or a UPE.
From December 2009, the ATO took the view that a UPE left sitting unpaid amounted to the company providing financial accommodation to the trust, making it a loan under Division 7A. The arrangement then had to go on formal loan terms, with interest and repayments, or the trust risked an unfranked deemed dividend.
In Commissioner of Taxation v Bendel [2026] HCA 18, decided by a five to two majority, the High Court rejected that reading. A company that simply does nothing about its entitlement has not lent anything. Doing nothing is not the same as making a loan.
On 26 June 2026 the ATO published its decision impact statement on the Bendel case, accepted the reasoning, and confirmed the determination setting out its former view, TD 2022/11, will be withdrawn while related guidance is reviewed. Further guidance may follow, so the direction is settled even though the detail is not.
The old position cost real money, and here is where it went
If you have been complying with the previous approach, the cost was never just paperwork.
A complying loan carries a minimum yearly repayment calculated at the ATO benchmark rate, and that rate has climbed. For the 2026-27 income year it is 8.77 per cent, up from 8.37 per cent the year before. For a trust group carrying a few hundred thousand dollars of entitlements, meeting that repayment each June meant real cash moving out of the trading business into the company, then often lent straight back to keep trading. Money went in a circle, with a fee attached to every lap.
Miss a repayment and the shortfall could be treated as an unfranked dividend, taxed at marginal rates with no franking credit to soften it. That is the risk the family trust tax changes have taken off the table for entitlements that are simply left unpaid.
Before you unwind anything, read this part twice
This is where owners get into trouble.
The ATO’s statement draws a clear line. An entitlement that has simply been left outstanding is not a loan. But an entitlement that was actually put on complying loan terms is a loan as a matter of fact, and it keeps being treated as one. Tearing up an existing agreement is not a tidy exit. It is a new transaction with its own consequences.
The family trust tax changes do not switch off the rest of the integrity rules. Three survived the decision untouched. Subdivision EA can still apply where the trust goes on to pay or lend money to a shareholder of that company or their associate. Section 100A can apply where the entitlement came out of a reimbursement agreement, and the result there is the trustee taxed at the top marginal rate. Part IVA, the general anti-avoidance rule, sits behind all of it.
One point gets lost in the headlines. The outcome turned partly on the specific terms of that trust deed and the way the resolutions were drafted. Deeds are not interchangeable. Yours needs reading before anyone tells you what this means for your group.
The bigger shift is not the ruling, it is what arrives in 2028
The second of the family trust tax changes is the larger one, and it has not happened yet. On 12 May 2026, as part of the 2026-27 Federal Budget, the Government announced a 30 per cent minimum tax on discretionary trusts from 1 July 2028. This measure is not yet law, and the detail is still being worked through. Treasury released a consultation paper on 8 July 2026 and submissions have closed.
The design matters more than the headline rate. The tax would apply at the trustee level on the trust’s taxable income. Beneficiaries who are not companies would receive a non-refundable credit for the trustee’s tax, so someone on a higher rate tops up and someone on a lower rate loses the excess. Corporate beneficiaries would not receive that credit at all, which is what would make bucket companies far less attractive.
The Government has also said it will provide a restructure rollover, available from 1 July 2027 and time limited to three years, so on the announced timing it closes on 30 June 2030. It is designed to help move assets out of discretionary trusts into other structures. The relief opens a year before the tax starts, which is a clear signal about when the thinking should happen.
Two Melbourne examples of the family trust tax changes in practice
A Carnegie trades business with a bucket company
A plumbing business runs through a family trust and makes $240,000 profit. The trustee distributes $90,000 to the family’s company so that portion is taxed at the company rate, and the cash stays in the business to fund vans, stock and wages.
Under the previous approach, that $90,000 needed a complying loan agreement and a repayment every year at the benchmark rate. After Bendel, an entitlement left unpaid is not automatically a loan, so that annual cycle may no longer be needed for new entitlements. The family trust tax changes do not remove the need to check the deed, keep resolutions and accounts consistent, and confirm no money quietly found its way to a family member.
A family that splits income to a lower earning spouse
A retail business trust has $150,000 of taxable income and distributes a large share to a spouse who works part time and has little other income. Today that income is taxed at her marginal rates, which is the point of the arrangement.
If the proposed minimum tax becomes law, from 1 July 2028 the trustee would pay 30 per cent on the trust’s taxable income first. She would still report her share and claim a credit, but because the credit is not refundable, any part above her own tax on that income is lost. For families whose planning rests on lower rate beneficiaries, that is the change that bites. It remains a proposal, so nothing needs dismantling today.
Five questions the family trust tax changes make worth asking now
1. What does your trust deed actually say about entitlements and whether they are held separately? This is the first document, not the last.
2. Do you have existing complying loan agreements, and have the repayments actually been made? If so, those loans stay loans, and need servicing until you have advice on your position.
3. Did any cash actually move to a shareholder of the company or to a family member? If it did, Subdivision EA is the provision to look at, not Division 7A generally.
4. Do your resolutions, financial statements and tax returns tell the same story? Inconsistent records turn a defensible position into an expensive argument.
5. Is a discretionary trust still the right structure for your group by 2028? For some families the answer is yes, for reasons unrelated to tax, such as asset protection and succession. For others, the rollover window from 1 July 2027 is worth planning around now.
A timeline worth putting in the calendar
Between now and 30 June 2027: review the deed and the records, keep servicing existing complying loans, and hold off on unwinding anything while the ATO finishes reviewing its guidance.
From 1 July 2027: the proposed restructure rollover opens, running for three years. If a change of structure is on the cards, this is the window it is designed for.
From 1 July 2028: the 30 per cent minimum tax would start, if it is legislated in its announced form.
Every year in between: if you are keeping complying loans on foot, the minimum yearly repayment still has to be made by 30 June, calculated using the benchmark rate published for that income year, not the rate that applied when the loan started.
Family trust tax changes: the questions Melbourne owners are asking
Does this mean I can stop doing loan agreements?
For entitlements left unpaid where nothing else happens with the money, the reasoning in Bendel says no loan arises. Agreements already in place remain loans. The answer turns on your deed and your records, which is why this is a conversation rather than a rule of thumb.
Can I claim back tax I paid under the old ATO view?
Some taxpayers may have objection or amendment rights for earlier years, but time limits apply and many years are already out of time. Worth asking early, not at the next tax return.
Is the 30 per cent trust tax definitely happening?
No. Of the two family trust tax changes, this is the one that is only announced. It came from the May 2026 Budget with a start date of 1 July 2028 and is not yet law. Treasury has consulted on the design and changes are possible. Planning for it is sensible. Acting as though it is settled is not.
Will my family trust still be worth having?
For many Melbourne families, yes. Trusts do work that tax rules do not touch, including holding assets apart from a trading business and passing it to the next generation. The question is whether the tax benefit you counted on will still be there.
What about testamentary trusts set up under a will?
The announced measure carves out certain trusts and income, including income from assets of discretionary testamentary trusts already in existence when it was announced. How trusts created later would be treated is one of the points Treasury has been consulting on, so this is not settled. If estate planning is part of your structure, review the will alongside the trust.
I have a company but no trust. Does any of this affect me?
Division 7A still applies in full to money you take out of your own company, at a higher benchmark rate this year. Bendel was about entitlements from a trust, not loans to shareholders, and those rules have not moved.
What should I do first?
Find your trust deed and last year’s resolution, and book a review before the year gets busy. Most of the value in these family trust tax changes comes from acting with time to spare, not in June.
Where to from here
The family trust tax changes of 2026 have handed owners a real simplification and a longer term question at once. The simplification is available now. The question needs an answer before 1 July 2028, and the rollover window opens before that.
At Angkor CA in Carnegie we work with family businesses across Melbourne on this kind of decision, from business structuring and strategy through to the accounting and tax work that keeps it defensible. If you have a trust and a company and are not sure where you stand, a short conversation now saves a long one later.
Call us on 1300 888 168, email [email protected], or get in touch through our contact page. No pressure, just a clear answer about your own structure.This article contains general information only and does not constitute personal tax, legal or financial advice. It does not take your objectives, financial situation or needs into account. The minimum tax on discretionary trusts is an announced measure and is not yet law. Please consult a qualified adviser about your own circumstances before acting.