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TD 2022/11 vs. The Bendel Case

· 4 min read
Myaccountant Team

The intersection of ATO Tax Determination TD 2022/11 and the Federal Court's decision in Commissioner of Taxation v Bendel has created one of the more significant areas of uncertainty in Australian trust taxation. For trustees and their advisers, understanding how these two positions interact is critical to managing compliance risk.

What Is TD 2022/11?​

Tax Determination TD 2022/11 sets out the ATO's view on the application of Section 100A of the Income Tax Assessment Act 1936 to trust distributions. The determination focuses on arrangements where a beneficiary is made presently entitled to trust income, but the economic benefit of that income flows to a different person — typically through a reimbursement agreement.

The ATO's position in TD 2022/11 is broad. It asserts that Section 100A can apply to a wide range of family trust distribution arrangements, including those that have been considered routine for decades. The determination takes the view that the "ordinary family or commercial dealing" exception — which shields certain arrangements from Section 100A — should be interpreted narrowly.

In practical terms, TD 2022/11 puts the ATO on record as willing to challenge distributions where the entitled beneficiary does not genuinely benefit from the income, even in common family trust scenarios.

The Bendel Decision​

The Bendel case reached the Full Federal Court and considered the scope of Section 100A in a specific trust distribution arrangement. The taxpayers, Mr and Mrs Bendel, operated a family trust that distributed income to a related corporate beneficiary. The ATO argued that the arrangement constituted a reimbursement agreement under Section 100A.

The Full Federal Court found in favour of the taxpayers, holding that the distribution arrangement did not constitute a reimbursement agreement within the meaning of Section 100A. Critically, the Court adopted a broader interpretation of the "ordinary family or commercial dealing" exception than the ATO had argued for.

The decision suggests that routine trust distributions within a family group — where the arrangement reflects a genuine commercial or family purpose — may be protected by the exception, even if the economic benefit does not flow directly to the entitled beneficiary in every case.

Where TD 2022/11 and Bendel Diverge​

The tension between the ATO's position and the Court's decision is clear. TD 2022/11 takes a narrow view of what constitutes an ordinary family or commercial dealing, while Bendel supports a broader interpretation.

Key areas of divergence include:

  • Scope of "reimbursement agreement." The ATO interprets this broadly in TD 2022/11; the Court in Bendel required a more direct connection between the distribution and an agreement to redirect the benefit.
  • Ordinary family dealing exception. The ATO argues this exception is limited to straightforward arrangements; the Court was willing to apply it to more complex family trust structures.
  • Practical application. TD 2022/11 implies that many common distribution patterns are at risk; Bendel provides reassurance that routine family arrangements may be protected.

What This Means for Trustees​

The ATO has not withdrawn or amended TD 2022/11 following the Bendel decision. This means the ATO's stated compliance position remains more aggressive than the Court's ruling would require. Trustees face a practical question: follow the ATO's published guidance, or rely on the broader protection suggested by Bendel?

The prudent approach is to:

  1. Document the commercial or family purpose of every distribution arrangement.
  2. Ensure distributions reflect genuine economic activity, not purely tax-driven allocation.
  3. Monitor further developments. The ATO may seek to appeal or may issue updated guidance. Legislative amendments are also possible.
  4. Seek specialist advice. The interplay between TD 2022/11, Bendel, and the broader Section 100A framework is nuanced, and individual circumstances vary significantly.

The Bendel decision is a win for taxpayers, but it is not the final word. Trustees and advisers should treat it as one factor in a still-evolving area of tax law.