Australia: Impact statement on recent Full Federal Court Division 7A decision

The Australian Taxation Office (ATO) applied for special leave to appeal to the High Court and released an interim decision impact statement in response to the Full Federal Court's February 19, 2025 decision that an unpaid present entitlement (UPE) to income or capital of a trust estate was not a “loan” that may result in deemed dividends under Division 7A. Read TaxNewsFlash

According to the interim decision impact statement, the ATO does not intend to revise its views relating to private company entitlements to trust income and will be administering the law in accordance with the published views relating to private company entitlements and trust income in TD 2022/11 until the appeal process is finalized.

However, until the appeal process is finalized, when a decision turns on whether or not an unpaid present entitlement is a loan, the ATO will not propose to seek to finalize:

• Decisions on issuing amending assessments
• Decisions on private ruling applications that go directly to this issue
• Objection decisions in relation to objections to past-year assessments (for which no settlement was reached)

However, if a decision is required to be made (for example, because the taxpayer's period of review will elapse or a taxpayer gives notice requiring the Commissioner to make an objection decision), the ATO's decisions will be based on its existing view of the law.