The High Court has ruled against the Australian Taxation Office in Steven Bendel's tax dispute, finding on Wednesday that he and his company did not owe more than $1 million in additional taxes, penalties and interest.
The decision gives Bendel a clear win in a landmark case that had been watched for its potential effect on trust and company arrangements. Judges said the unpaid entitlement from a trust to a company was not a loan for tax purposes, a finding that undercuts the ATO's position in the case.
That matters beyond Bendel himself. The ruling is said to have wide-ranging consequences for hundreds of thousands of taxpayers, which is why the steven bendel tax dispute has drawn so much attention among accountants and business owners who use trusts in their affairs.
Bendel is a suburban accountant, and his case was one of the rare tax fights to reach the High Court. The dispute centered on whether the unpaid entitlement should be treated as borrowed money, a classification that would have triggered the bill for extra tax, penalties and interest.
The ATO was on the losing side of a landmark tax avoidance case, a result that may force a rethink of how it approaches similar arrangements. The judgment did not say what the agency will do next, leaving open whether it will change its enforcement stance or test the ruling in other ways.
For Bendel, the court's decision removes a liability of more than $1 million. For the tax system, it closes one dispute while opening a much larger question about how many other cases now have to be reassessed.
