A legal specialist has warned against believing the decision handed down by the High Court of Australia in Commissioner of Taxation v Bendel can be extended to SMSF unit trust holdings.
The result of the case released in June confirmed an unpaid present entitlement from a unit trust does not represent a loan or financial assistance of any kind.
DBA Lawyers special counsel Bryce Figot acknowledged individuals may try to apply the Bendel case finding because the definition of a loan in section 109D(3) of the Income Tax Assessment Act is almost identical to the one contained in the Superannuation Industry (Supervision) Act.
“How relevant is Bendel to self-managed super funds? On [face value] it’s not relevant,” Figot told attendees of a recent technical webinar hosted by the Auditors Institute.
“But if you squint at it, [you might argue] it’s very relevant.
“If you try to [apply] Bendel to SMSFs, you could say: ‘Oh actually post Bendel, SMSFs can invest in unit trusts even if the unit trust does not promptly distribute [earnings] to the [fund].’
“On the one hand, if you want it to be a test case, great, have that reading, [but] on the other hand, no, Bendel does not stand for that.
“You cannot simply get one interpretation of wording from one piece of legislation and try to slavishly apply it to another.”
According to Figot, realistically the ATO has confirmed this extrapolation of the Bendel case decision in its impact statement pertaining to the High Court ruling.
“[The regulator has] expressly said ‘here are the documents we are looking at updating’ [as a result of the High Court’s decision] and none of them related to SMSFs,” he observed.
The ATO took the matter to the High Court after the full Federal Court previously ruled the definition of a financial accommodation, or loan, did not include unpaid present entitlements from unit trusts.
Darin Tyson-Chan
Editor
Darin is the founder and publisher of Benchmark Media, an independent publishing house whose mastheads include financialobserver, selfmanagedsuper and smstrusteenews. He has been covering the financial services space for over a decade and in this time he has worked for a variety of trade publications. Darin has also written for the Money section published in The Sydney Morning Herald and The Age.
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