Tax experts wait for further clarity after major AAT ruling on trust distributions and loans

Small business tax advisors are carefully assessing an Administrative Appeals Tribunal decision that challenges the Australian Taxation Office’s interpretation of specific trust distribution rules, with one leading accountant “playing a straight bat” before a likely appeal from the ATO itself.

On September 28, the AAT sided with accountant Stephen Bendel in his argument against the ATO’s interpretation of Division 7A of the Income Tax Assessment Act, which addresses loans between trusts and companies.

The decision, if it goes unchallenged, could have significant financial ramifications for other trusts and their beneficiaries.

Before Division 7A came into effect, trust beneficiaries could funnel distributions into ‘bucket’ companies under their control.