“On its face, Bendel is not relevant for SMSFs. Bendel does not involve an SMSF. However, on a slightly closer inspection, the connection is clear,” Figot said.
“In respect of the meaning of ‘loan’, Bendel considered the expression ‘provision of credit or any other form of financial accommodation’ in s 109D(3) of the Income Tax Assessment Act 1936 (Cth) (ITAA 1936). Section 10(1) of the Superannuation Industry (Supervision) Act 1993 (Cth) (SISA) uses almost identical language when defining a loan.”
Figot said the SIS Act s10(1) defines “loan” as “[including] the provision of credit or any other form of financial accommodation,” while in the ITAA 1936 s109D(3) defines it as including “a provision of credit or any other form of financial accommodation.”
“This typically becomes relevant where an SMSF has invested in a unit trust, the unit trust has declared a distribution to which the SMSF is now presently entitled, and the unit trust has not promptly paid the distribution and UPE exists,” he said.
He added that the ATO view, as stated in the SMSFR 2009/3, is:
“[W]hen an overall consideration of the factors surrounding the non-payment of the trust distribution is seen as an arrangement for the provision of credit or financial accommodation, it will satisfy the extended definition of ‘loan’ in subsection 10(1).
Consequently, the unpaid amount will be included in the in-house assets of the SMSF, where:
- the trust in question is a related party of the SMSF; and
- the circumstances indicate that a loan agreement has been entered into, or that a consensual agreement for the provision of credit or other form of financial accommodation has been reached between the parties”.
Later, in the same ruling, the ATO states:
“Factors which might lead to the conclusion that a consensual arrangement for the provision of credit or financial accommodation does exist include:
- the trustees are the same or under substantially the same control;
- the amount of the unpaid trust distribution is substantial;
- the amount has remained unpaid for a substantial period of time;
- distributions for multiple years remain unpaid; and
- any documents executed by the parties evidencing an intention to defer payment of the trust distribution.”
Figot said investments made by SMSFs in unit trusts before 12 August 1999 are typically excepted from constituting in-house assets, as are certain reinvestments of pre-1999 unit trust distributions made before July 2009.
“However, any further investments in or loans to those unit trusts constitute in-house assets. Part 8 of the SISA broadly prohibits SMSFs from owning in-house assets,” he said.
“This begs the question: can an SMSF effectively inject further SMSF money into such a unit trust by not calling upon an UPE from existing units? Based on SMSFR 2009/3, the answer is typically no because such UPEs, if not promptly paid, will constitute loans that are thus in-house assets. However, after Bendel, some are posing the question: is the ATO correct?”
He noted that the most recent Bendel decision indicates that the ATO was incorrect.
“However, does that also mean the ATO was also wrong in SMSFR 2009/3? In our 2025 article, we warned that Bendel considered a different provision in a different Act to what is relevant for SMSFs,” he said.
“It is tempting to simply ‘copy’ the interpretation of one phrase from one Act and ‘paste’ that interpretation to a similar phrase from another Act. However, that is not how one should approach the task of statutory interpretation. Similar wording from another Act might be somewhat instructive.”
He said, however, the Full Court of the Federal Court states in Bendel: “The construction of s 109D(3) we have adopted is derived from the language of the statute construed in its context and results in each of the provisions in Div 7A being given operative effect.”
“In other words, the correct construction of a provision depends on the language of the specific statute in which that provision appears. Therefore, it is conceivable that the same words in the definition of ‘loan’ in the ITAA 1936, could have a different meaning to the same words in the SISA,” he said.
“Now that we have the High Court decision, that warning seems even more relevant. Consider in particular the majority judgement of Gageler CJ, Gordon, Edelman, Steward and Geelson JJ.”
Figot notes, the majority judgement spends significant time addressing certain preliminary questions (paragraphs 28–57).
“These preliminary questions were ‘[d]epart[ures] from the common position of the parties before the Full Court [of the Federal Court].’ The answers to these preliminary questions were very dependent on the specific terms of the trust in Bendel,” he said.
“The majority judgement notes that that trust is described as a ‘discretionary trust.’ It is conceivable that different answers would have arisen under a trust whose terms confer a fixed entitlement to income and capital. Naturally, for non-arm’s-length income reasons, hopefully an SMSF would only invest in such a ‘fixed’ trust.”
Secondly, he said, the majority judgement drew attention to comments that “the outcome sought by the Commissioner would result in the taxation of the same amount twice.”
“They quoted the AAT that ‘[s]uch an outcome was considered to be problematic or inappropriate.’ This did not ultimately form part of the majority judgement’s reason for deciding.
“However, the mere fact that the majority judgement mentioned it suggests that it had at least some importance. In the SMSF context, there is no equivalent double taxation problem/inappropriateness.”
Most importantly, he said, the majority judgement considered the specific legislative framework and statutory context (paragraphs 59–85) and the specific legislative framework and statutory context of s 109D(3) of the ITAA 1936 are different to that of the definition of “loan” in s10(1) of the SIS Act.
“Few, if any, SMSFs wish to be test cases. Accordingly, at least for the time being, practically speaking, SMSFs should ignore Bendel. In other words, SMSFR 2009/3 is still the safest guidance on which to proceed,” Figot said.
“However, we acknowledge that some SMSFs, for various reasons, might wish to test the boundaries of the ‘new’ law as it currently stands today post-Bendel. Such SMSFs would have some interesting arguments to make in light of Bendel.
“That said, until and unless the ATO provides guidance on this matter, such SMSFs should strongly consider first obtaining tailored legal advice on their circumstances.”
