Division 7A – Current state of play
Source: South Australia
Published Date: 5 May 2026
Division 7A prevents private companies from making tax-free distributions of profits to shareholders (or associates) by treating certain loans, payments and forgiven debts as deemed unfranked dividends. But despite being introduced in 1997, there is significant uncertainty on how and when its provisions will apply. Although the Full Federal Court confirmed in Cmmr of Taxation v Bendel [2025] FCAFC 15 that a corporate beneficiary’s “unpaid present entitlement” (or UPE) is not a “loan” for Div. 7A purposes, the Commissioner has appealed to the High Court—and taxpayers and advisors remain in limbo until the Court has handed down its final decision.
This session will:
- Provide a refresher on the way Div. 7A operates, including the implications of complying loans, company-to-company loans, and loans via interposed trusts.
- Examine issues raised by UPEs.
- Review the Full Federal Court decision in Bendel and the High Court’s ruling (if delivered before 5 March 2026).
- Discuss whether there will be different outcomes following the High Court’s decision, depending on whether the Court finds in favour of the taxpayer or the Commissioner.
- • Consider the ATO’s existing Div. 7A guidance and Interim Decision Impact Statement.
- Highlight issues with “legacy” UPE arrangements and sub-trust structures.
- Explain key risk areas for practitioners, including the potential application of Subdivs. EA and EB, and sec. 100A; and
- Time permitting, provide practical examples to illustrate compliant and non-compliant scenarios.
Individual Session
Details
- Published By: Michael Butler CTA
- Published On:5 May 2026
- Event Name:SA Tax Forum
- Session Name:Division 7A – Current state of play
- Listen Time:1+ hour
- Took place at:Stamford Plaza Adelaide
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