Subdiv EA and s100A. So far, you haven’t put those two together. But maybe you should.
Subdiv EA and s100A
In this episode, we look at six more questions about Subdiv EA and s100A with Andrew Henshaw of Velocity Legal. We also look at the Guardian case, because the setup in the Guardian case was very similar to the Bendel case, but the Commissioner attacked it on s100A and not Div 7A.
Here is what we learned but please listen in as Andrew explains all this much better than we ever could.
To listen while you drive, walk or work, just access the episode through a free podcast app on your mobile phone.
Subdiv EA and s100A
Even though The Bendel Case feels like a win, even if the ATO withdraws TD 2022/11, this doesn’t mean UPEs are out of the danger zone.
You still have Subdiv EA, s100A, Part IVA and a possible law change to contend with.
Subdiv EA
If you make a private company presently entitled but distribute the money to a shareholder or their associate, Subdiv EA will deem an unfranked dividend from the company to the recipient.
s100A
The ATO has already indicated in its interim Decision Impact Statement (‘DIS’) that it may seek to apply s100A if Div 7A is no longer an option. s100A will completely ignore the distribution that gave rise to the UPE. It will also ignore any default beneficiaries. And instead assess the trustee.
PCG 2022/2
Remember the Green Zone in PCG 2022/2 that lists scenarios the ATO wouldn’t pursue under s100A? UPEs without a Div 7A loan agreement are not among them.
Part IVA
Then, of course, there is Part IVA. Where the ATO can assess whoever received a financial benefit.
Law Change
And the possibility of a law change. The 2018/19 Federal Budget already included proposed reforms to Div 7A, which might gather a new sense of urgency after Bendel.
But of these four options – Subdiv EA, s100A, Part IVA and law change – Subdiv EA and s100A are the most likely candidates in the short term.
Guardian Case
The setup in the Guardian case was very similar to the Bendel case. Like the Bendel case, there was a trust (‘Australian Investment Trust’), a corporate trustee (‘Guardian AIT Pty Ltd’) and a bucket company (‘AIT Corporate Services Pty Ltd’). A very common set up.
In both cases, the corporate trustee was an Australian company, hence the trust was an Australian tax resident. And the bucket company was also an Australian company, hence an Australian tax resident. So in both cases, all entities involved are Australian tax residents.
And in both cases, the trust made the bucket company presently entitled.
But here are three important differences.
1 – Mr Steven Bendel is the sole shareholder of the bucket company. In Guardian, the trust is the sole shareholder of the bucket company.
2 – The controller – Mr Steven Bendel – is an Australian tax resident. In Guardian, the controller is a foreign resident from Vanuatu.
3 – In Bendel, the UPE wasn’t paid to the company. In Guardian, the UPE is paid to the company, which then declares a dividend back to the trust.
So these are the three critical differences between the Bendel and Guardian case.
And remember that while Mr Vanuatu won on s100A, he lost on Part IVA.
So you can’t use a bucket company to wash trust income that would be assessed to the trustee into a franked dividend with no further tax to pay.
What now?
Look at where the money went for any post-2009 UPEs. If the money went to the shareholders or their associates, you need the Div 7A loan agreement to protect from Subdiv EA anyway.
If the money didn’t go to the shareholders or associates, but went to creditors or another company, then you depend on the Bendel Case.
And for new UPEs, the ones from trust distributions in 2023 that now need to be dealt with before you lodge the 2024 tax returns, get a Div 7A loan agreement, just in case, until you have certainty.
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Disclaimer: Tax Talks does not provide financial or tax advice. All information on Tax Talks is of a general nature only and might no longer be up to date or correct. You should seek professional accredited tax and financial advice when considering whether the information is suitable to your or your client’s circumstances.
Last Updated on 13 October 2025
Tax Talks spoke to Andrew Henshaw - Director at Velocity Legal - for more details.
