The High Court will deliver judgment in Commissioner of Taxation v Bendel on Wednesday, 10 June 2026. This week’s tax training will be the first in a series examining the decision.
Bendel is one of the most anticipated tax cases of this century. The question that has attracted the most public commentary is whether an unpaid present entitlement to a corporate beneficiary constitutes a loan for the purposes of s 109D(3) of the Income Tax Assessment Act 1936 (Cth). A separate question is whether the 2026–27 Budget proposals alter that position. Neither question is our concern. Legislation changes. The nature of trust rights does not.
Our focus across this series will be present entitlement as a matter of trust law. The High Court transcript reveals that the bench has been actively probing questions that go well beyond Division 7A and reach the fundamental nature of trust entitlements. We do not know whether the Court will determine those questions in its reasons. We will read the decision carefully and examine any aspects of present entitlement the Court discusses, if any. This session is the first step in that analysis.
The questions we will bring to the judgment are these.
What does it mean for a beneficiary to be “presently entitled” to trust income? The condition under s 97 of the ITAA 1936 is satisfied only if the beneficiary’s interest is vested in interest and vested in possession, and the beneficiary has a present legal right to demand and receive payment. That formulation is the starting point; it is not the end of the analysis.
Does a trustee’s resolution to distribute income create a debt, a sub-trust, or an equitable right of a distinct character? The divide in Commissioner of Inland Revenue (NZ) v Ward between North P and McCarthy J on the one hand, and Turner J on the other, frames this question precisely. North P and McCarthy J held that an unconditional resolution vests income immediately in the beneficiary without segregation of assets. Turner J required certainty of subject matter and the identification of specific property.
Is income property? The first instance decision concluded that income, before it is applied, is not property the trustee owns or controls; it is an equitable obligation of a distinctive kind. The Fischer v Nemeske framework of Gageler J provides the better analytical tool for understanding what arises when a distribution resolution is passed.
Once present entitlement is established and communicated to the beneficiary, is there a common law action for money had and received? If so, the unpaid amount may be a debt at law regardless of whether it falls within the statutory definition of a loan. This is the point most commentators have overlooked.
We have examined these questions progressively across previous sessions. The August 2024 session considered whether present entitlement creates an action for money had and received. The November 2025 article set out the full trust law analysis. The October 2025 session read the High Court hearing transcript and identified the questions the bench was probing. We will now read the answers, to the extent the Court provides them.
Required Reading:
Commissioner of Taxation v Bendel [2026] HCA [__] — link to be added on delivery, Wednesday 10 June 2026
Recommended Background:
Tax Training – 23/08/24 – Div 6, Present Entitlement and Bendel
Bendel May Be More Interesting Than It Appears – Clarifying Present Entitlement
Discussion led by Adrian Cartland.