Australia Tax Office Loses on Discretionary Trusts at High Court

Australia’s High Court on Wednesday rejected the national tax authority’s appeal of a challenge to its long-held position on how discretionary trusts are taxed.

In a 5-2 split decision, the court’s majority dismissed the Australian Tax Office position that “unpaid trust entitlements” represent loans from a corporate beneficiary back to the trust and should be taxed at the corporate tax rate as additional tax.

The ruling upheld a decision of the Federal Court of Australia in a long-running case bought by Steven Bendel and Gleewin Investments Pty Ltd. that hinged on the definition of loans in the 1936 Income ...