A significant shift in how trust distributions are viewed

On 10 June 2026, the High Court handed down its decision in Commissioner of Taxation v Bendel. This is a major development for family trusts and private business groups that use corporate beneficiaries as part of their structure.

For many years, business owners have used trusts to distribute income to a company (often called a “bucket company”) so that profits are taxed at the company tax rate, while the cash stays in the operating company to support the business or fund investments.

The Bendel decision directly affects how these arrangements are treated.

The issue – unpaid trust distributions

In a typical structure:

• A trust distributes income to a company
• The company pays tax on that income
• The cash is not paid out immediately

This unpaid amount is called an unpaid present entitlement (UPE).

For many years, the ATO treated many UPEs as loans for Division 7A purposes. This meant:

• Complex compliance requirements
• The need to document loan agreements
• Risk of deemed dividends if not managed correctly

What the High Court decided

The High Court rejected the ATO’s position on the facts of this case.

In simple terms, the Court said:

• A UPE is not automatically a loan just because it remains unpaid
• Doing nothing (that is, not calling for payment) is not the same as lending money
• Whether a loan exists depends on the actual legal and commercial relationship

The Court looked closely at the trust deed, trustee resolutions and accounting treatment. In Bendel, it found the amounts were held separately for the company and that no borrower–lender relationship existed.

Why this matters

This decision challenges a long-standing ATO approach that has influenced trust planning for more than a decade.

In practical terms:

• UPEs may no longer trigger Division 7A automatically
• Some existing arrangements may have been more conservative than necessary
• There may be planning opportunities going forward

However, this does not mean all UPE arrangements are now safe.

Important cautions

While the decision is positive, there are still important risks:

• The ATO is reviewing the decision and will update its guidance
• Other tax rules may apply depending on the facts, including:
  • Subdivision EA
  • Section 100A (reimbursement agreements)
  • Part IVA (anti-avoidance rules)
• Loans, payments or benefits provided to individuals can still trigger Division 7A
• Each structure depends heavily on its trust deed and how it is operated

In short, the decision removes one risk, but does not remove all risk.

Federal Budget changes – a bigger picture issue

At the same time, the 2026–27 Federal Budget proposes major changes to how discretionary trusts are taxed from 1 July 2028.

Key proposed changes include:

• A minimum 30% tax on trust income
• Limited or no benefit from distributing income to lower-tax beneficiaries
• Corporate beneficiaries not receiving credits for tax already paid at the trust level

If enacted, these changes may significantly reduce the effectiveness of traditional “bucket company” strategies and could lead to double taxation in some cases.

What should you do now

Given the uncertainty, a cautious and practical approach is recommended:

• Do not unwind existing structures without advice
• Continue to follow established processes for year-end distributions
• Review your trust deed, resolutions and documentation
• Do not assume Bendel applies to your situation
• Wait for further ATO guidance before making major changes

Most importantly, review your position in the context of both the Bendel decision and the proposed Budget changes.

Final thoughts

The Bendel decision is a significant and welcome clarification for many business owners. It removes a key technical risk that has applied to trusts and corporate beneficiaries for many years.

However, it comes at a time when broader tax reforms may change how trusts are used in the future.

The combination of these developments means this is an ideal time to review your structure and ensure it remains appropriate.

Need help?

If you would like to understand how the Bendel decision impacts your situation, please contact your Holman Hodge adviser.

As 30 June rapidly approaches, pharmacy owners should be actively reviewing their business and preparing for year-end obligations. Beyond the usual tax considerations, pharmacies face a unique mix of operating and accounting complexities that require a tailored approach. At Holman Hodge, we work closely with pharmacy clients and understand the critical role that clean, accurate reporting plays in presenting a true picture of your business to stakeholders, including banks.

Here are key focus areas for pharmacists to ensure a smooth and successful end to the financial year.

Stocktake

Performing a stocktake at year-end is essential, not just for compliance but for operational insight. Pay special attention to negative stock balances. These typically indicate system errors or data entry issues and can distort both profit and inventory valuation.

For a clean stocktake:

• Ensure physical counts align with system data.
• Investigate and correct negative stock positions.
• Identify and write off expired, damaged or slow-moving stock.

Choosing the appropriate valuation method (cost, market value, or replacement) is also crucial for consistent financial reporting.

As we close up the end of another financial year, please remember to run a Stock on Hand and Owing Scripts report as at 30 June 2026. The report should be run before trading on the 1st of July 2026.

Review Debtors

Pharmacy owners should closely review their Shop accounts and debtor ledgers, especially amounts owed from PBS (Pharmaceutical Benefits Scheme) accruals, before 30 June. These can materially affect your reported operating profit. Inaccurate debtor records, particularly over or under reporting of PBS accruals may lead to misleading financial performance metrics. This has the potential to impact your ability to meet bank covenant requirements, especially when profit-based metrics are tested.

Take the time now to validate debtor balances and ensure reporting reflects actual receivables.

Review Creditors

As with debtors, aged creditor listings should be reviewed for accuracy. Misstatements in liabilities can distort your business’s working capital position and again lead to misleading financial ratios used in banking or valuation scenarios.

Verify all supplier statements, follow up on any long-outstanding amounts, and ensure your creditor balances reflect only real, payable obligations.

Inter-Store Transfers

Multi-store operators should review and reconcile all inter-store transfers. Unreconciled or incorrect transfers between locations can result in double-counting or under-reporting of stock, skewing profit margins across stores.

Establish a formal process to review these transfers and ensure all records are current and accurate before 30 June.

Payroll Tax

With pharmacy staffing levels on the rise and wage increases flowing through, many owners may be edging closer to payroll tax thresholds, especially if operating across multiple locations or under related business structures.

Each state and territory in Australia has its own payroll tax threshold, ranging from around $900,000 to over $2 million, depending on the jurisdiction. If your total Australian wages exceed the applicable state threshold, you may become liable for payroll tax, even if your business has not previously been subject to it.

Key considerations:

• Review your total wages paid, including superannuation and certain contractor payments.
• Consider if any grouping provisions apply (e.g. related entities under common control).
• Plan ahead for any future wage growth or staffing changes that may tip you over the line.

At Holman Hodge, we help pharmacy owners understand whether they’re at risk of crossing a threshold and develop proactive strategies to manage and, where appropriate, mitigate their payroll tax exposure. This might include reviewing business structures, reallocation of wages, or exploring legitimate grouping exemptions.

If you’re unsure of your position, now is the time to review it before the new financial year begins.

Instant Asset Write-Off Rules

A reminder that eligible pharmacies with aggregated annual turnover of less than $10 million may be able to claim an immediate tax deduction for the business-use portion of eligible depreciating assets costing less than $20,000 each (GST exclusive).

The $20,000 threshold applies on a per-asset basis, meaning multiple assets may qualify for an immediate deduction, provided each individual asset costs less than the threshold. The asset must be first used or installed ready for use for a taxable purpose between 1 July 2025 and 30 June 2026. The measure can apply to both new and second-hand assets.

When assessing whether an asset is below the threshold, care should be taken with the total cost of the asset, including any relevant second element costs or cost additions. These costs may cause the asset, or relevant addition, to exceed the threshold and therefore fall outside the immediate deduction rules.

Assets costing $20,000 or more cannot be immediately written off under these rules. For eligible pharmacies using the simplified depreciation rules, those assets can generally be allocated to the small business depreciation pool and depreciated at 15% in the first income year and 30% in each subsequent income year.

Owners & Managers should also review their fixed asset schedule before year-end to identify any assets that have been sold, scrapped, destroyed, replaced, or are no longer used and are not expected to be used again. Your advisor will determine, if a deduction may be available if the asset’s termination value is less than its adjustable value.

Pharmacies with aggregated turnover of $10 million or more are not eligible to use the small business simplified depreciation rules and will generally need to apply the ordinary depreciation rules, based on the asset’s effective life.

Don’t Forget General Tax Planning

In addition to pharmacy-specific tips, make sure you’re across broader tax planning strategies.

We’ve outlined these in our recent insights:

• Planning for the end of the financial year
• 2026 Federal Budget – Summary of Key Tax Changes
• Payday Super & Contractors

From superannuation contributions and asset write-offs to prepaid expenses and trust resolutions, these checklists are critical to maximise your tax outcomes and avoid any costly oversights.

How we can help?

If you’d like help reviewing your pharmacy’s records ahead of 30 June or want an estimate of your tax position, please reach out by contacting your Holman Hodge advisor directly. Clean data is not just about compliance, it protects your business reputation, supports decision making, and ensures financial reports are truly reflective of operational performance.

About the author

Jacob Prestia is a Senior Manager at Holman Hodge. He understands that his work with pharmacy clients encompasses much more than just the figures presented in compliance and management reports. He fosters personal relationships that extend to providing advisory services on critical matters such as restructures, cash flow management, and transactions, in addition to supporting clients in areas like property ownership, syndication, and development.

Year end tax planning 

As we approach the end of the financial year it’s a good time to start thinking about what you could do to minimise your tax liability, as well as other actions required before the end of the financial year (30 June).

There are some things that are new for 2026 and there are things that we talk to clients about every year.

Discretionary trusts

• Trust minutes/resolutions: Trustees of discretionary trusts have to resolve where they would like to distribute their income for the 2026 financial year prior to 30 June 2026. We will discuss distribution strategies with the trustees and assist with the documentation of these ahead of 30 June.
• Careful consideration needs to be had with regards to trust distributions across family groups. The ATO has provided guidance which details their position with regards to this, and where it impacts your group, we will discuss this with you in your year-end tax planning meeting.  Alternatively, you can contact us directly to discuss.

Tax Planning Tips & Information

• Base Rate Entity: The company tax rate for base rate entity companies remains at 25%.
• Asset purchases: If you are an eligible small business (aggregated turnover less than $10 million) you can generally claim an immediate deduction for assets purchased under $20,000, provided the asset is ready for use by 30 June 2026.
• Superannuation (personal): You are able to claim a tax deduction for any personal superannuation contributions up to your $30,000 cap for the 2026 financial year (which includes contributions from your employer). To claim a deduction for these super contributions, you must give your super fund a notice in the approved form and get an acknowledgement from the fund. There are also other eligibility criteria you must meet. If you haven’t used your full cap for the 2021, 2022, 2023, 2024 and 2025 financial years, you may also be able to claim an additional tax deduction for superannuation contributions up to the value of the unused cap for those years. If this is something you would like to utilise, please let us know and we can assess your eligibility and calculate how much can be utilised from prior years. This is the last year that any unused cap amount for 2021 can be utilised.
• Capital Gains Tax: If you have made a capital gain during the 2026 financial year, you may consider realising a capital loss (if appropriate) on another asset to offset the capital gain.
• Cash flow: Vary PAYG instalments for the June 2026 quarter (if appropriate). This is best done in conjunction with an estimate of your 2026 tax position.
• Working from home deductions: You can use the Fixed Rate method and claim a cents per hour amount for the 2026 financial year based on the ATO rate where you worked from home. Make sure you have detailed records that record the total number of hours you work from home and the expense you incur while working from home. You can also use the actual cost method.
• Substantiation: Ensure that you retain receipts or substantiation for any expenses you would like to claim such as those related to your work, self-education, travel and donations.
• Motor vehicle travel: If you travel over 5,000kms in your motor vehicle for work, consider whether you should maintain a logbook or whether you need to complete a new one (to be completed every five years). If you are relying on a logbook prepared from a previous year you also need to record the odometer reading as at 30 June.
• Trading stock: Conduct a stocktake at 30 June, write off any obsolete or damaged stock and choose your stock valuation method. You can use cost, market selling value or replacement value, for each item, and this can be changed each year. If you are an eligible small business entity and your trading stock value has not moved by more than $5,000 you do not have to do a stocktake.
• Superannuation (businesses): Pay your super before 30 June in order to get a tax deduction for the 2026 financial year. Super contributions need to have been received by the superannuation fund by 30 June – confirm with your software/clearing house provider if there are any cut-off dates to ensure this occurs. From 1 July 2026:
  • Super guarantee contributions will be due on payday, you should ensure your payroll systems, cashflow and payment/clearing house processes are ready for this change.
  • Super guarantee contributions will change from an Ordinary Time Earnings calculation to a Qualifying Earnings calculation, in particular, all commissions are expressly included, regardless of whether they were earnt outside ordinary hours.
• Accrued expenses: If you have a presently existing liability to pay an amount at 30 June, even where you may not have an invoice, the amount should be accrued to enable a tax deduction to be claimed in the current year.
• Prepaid expenses: If your business is a small business entity, you are entitled to a tax deduction where expenses covering a period of up to 12 months are prepaid.
• Bad debts: Review and write off bad debts to ensure a deduction in 2026 financial year.
• Bonuses to staff: if you pay bonuses to employees, a simple accrual may not be enough to ensure a deduction at 30 June.  To claim a deduction, you must ensure that you have presently existing obligation to pay the bonus and that it is quantifiable.

Can we give you a hand?

If you would like any further detail on the above, or for an estimate of your tax position for the 2026 financial year, please contact your Holman Hodge advisor.

The information in this email is factual information, and not financial advice. The information is objectively ascertainable information, and is not tailored to your personal circumstances. You should consider obtaining financial advice before making a decision in relation to this information.

The Federal Budget handed down on 12 May 2026 proposes some of the most significant tax reforms in recent decades. There is a clear focus on cost of living relief, alongside structural changes to the taxation of investment income, property, and business structures.

This article outlines the key proposed tax measures and what they may mean in practical terms.

Note: Most measures are proposals only and will require legislation to pass Parliament before becoming law.

1. Changes to capital gains tax (CGT)

• The 50% CGT discount is proposed to be replaced with cost base indexation and a minimum effective tax rate of 30% on capital gains from 1 July 2027. The changes are expected to apply prospectively to gains accruing after that date. While the new framework has been announced, detailed design elements – including transitional valuation methods and the precise treatment of different taxpayer groups – have not yet been confirmed.
• Indexation of the cost base will be based on CPI for assets held for at least 12 months (from 1 July 2027, proposed)
• Applies to individuals, trusts and partnerships
• Companies will not be eligible for indexation
• The existing 1/3 discount for complying superannuation funds will remain
• The exemption for pre-20 September 1985 assets will change to tax post 30 June 2027 growth in value.

What this means in practice:

• Blended CGT calculations may apply for assets held at 1 July 2027
• Valuations as at 30 June 2027 are likely to be important
• Expected choice between valuation and formula-based apportionment methods
• Increased record-keeping requirements
• Reduced benefit of long-term asset holding
• Potential for higher CGT outcomes for investors

2. Changes to negative gearing 

• Negative gearing for residential property generally limited to new builds from 1 July 2027 (proposed)
• Properties acquired (or contracted) before 12 May 2026 expected to be grandfathered
• Net losses will need to be carried forward for deduction against future rental income (including other residential properties held) or residential property capital gains

What this means in practice:

• “New build” expected to focus on genuine new housing supply
• Likely exclusion of knock-down and rebuild projects (unless resulting in additional number of dwellings)
• Managed investment trusts and superannuation funds not expected to be affected
• Other asset classes such as commercial property and shares not impacted
• Investors may need to reassess property strategies
• Bank finance on residential property acquisitions may be more difficult to obtain as loan servicing calculations will cease to recognise the taxation benefit of negative gearing

3. Proposed 30% minimum tax on discretionary trusts 

• Trustees will pay a minimum 30% tax on trust income from 1 July 2028 (proposed)
• Individual beneficiaries receive a non-refundable 30% tax credit
• Corporate beneficiaries will not receive a credit
• Exclusions are proposed for:
  • Fixed and widely held trusts
  • Superannuation funds
  • Charitable trusts
  • Deceased estates
  • Certain primary production income
  • Existing testamentary trust arrangements (at 12 May 2026)

What this means in practice:

• Reduced effectiveness of distributions to lower-income beneficiaries
• Use of corporate beneficiaries likely curtailed
• Review of family group structures may be required
• Limited rollover relief expected for restructuring from 1 July 2027
• Ownership of businesses by trusts (or partnership of trusts) may need to be reconsidered

4. Tax relief for individuals 

• A $1,000 standard deduction for work-related expenses without substantiation.  Donations, Union Fees and Professional association memberships can be claimed in addition.
• A $250 annual tax offset from 2027–28
• Reduced tax rates for income between $18,201 and $45,000 (15% then 14%)
• Increase in Medicare levy low-income thresholds

What this means in practice:

• Simplified deduction claims for many taxpayers
• Option to claim higher actual expenses remains
• Modest tax relief for lower and middle-income earners

5. Business and investment measures 

• Permanent $20,000 instant asset write-off from 1 July 2026
• Reintroduction of loss carry-back rules for eligible companies
• Gradual reduction of FBT concessions for electric vehicles
• Changes to the R&D tax incentive

What this means in practice:

• Continued access to accelerated deductions for small business
• Improved cash flow support via loss carry-back
• Review required for electric vehicle arrangements as FBT will need to be considered in salary packaging arrangements.

What should you consider now? 

• Property investment strategies
• Capital gains exposure
• Trust and ownership structures
• Business structure and asset ownership
• Salary Packaging arrangements involving electric vehicles

Final comments 

• Many measures commence from 1 July 2027 or later, allowing time for planning
• All measures remain subject to legislation and may change
• Further updates will be provided as details are confirmed

Please contact your Holman Hodge adviser for further information.

What Small Businesses Need to Know

From 1 July 2026, superannuation must be paid much closer to when people are paid. This change, known as Payday Super, does not change who is entitled to super, but it does change when super must be paid.

For many small and family businesses, the main risk will be contractor payments, particularly where contractors are paid through accounts payable rather than payroll.

What Is Changing?

Currently, super is commonly paid quarterly, although some employers pay more frequently.

From 1 July 2026:

• Super must be paid each time a worker is paid
• The contribution must generally reach the super fund within 7 business days of payment, subject to limited exceptions
• This applies to employees and to contractors who are treated as employees for super purposes

The biggest change is timing. The rules about who gets super stay the same.

Does This Apply to Contractors?

It can.

If a contractor is already treated as an employee for superannuation guarantee (SG) purposes, super is payable and Payday Super applies. Calling someone a contractor or paying them on invoice does not remove the obligation.

Why Contractors Are Higher Risk

Contractors are often paid in ways that sit outside normal payroll processes, for example:

• Payment on invoice
• Milestone or one-off payments
• Payments approved by managers rather than payroll

Under the old quarterly system, there was time to fix issues. Under Payday Super, deadlines can be missed within days if payroll is not aware of the payment.

What Is a Payday for Contractors?

For contractors subject to SG, the key date is the Qualifying Earnings day (QE day). This is the day you pay the contractor amounts that attract super.

Each payment can start a new 7-business-day deadline, even if payments are irregular.

What Are Qualifying Earnings?

From 1 July 2026, super is calculated on Qualifying Earnings rather than Ordinary Time Earnings (OTE).

In practical terms for most small businesses, Qualifying Earnings include amounts that are currently superable under OTE, plus certain additional payments such as all commissions and salary sacrifice amounts that would have been qualifying earnings if not sacrificed.”

For many employers, what attracts super will not change.   However, some payments such as commissions may now be captured more consistently.  The main change is that super must be calculated and paid for each payment, not quarterly.

Why Large or Irregular Payments Matter

Contractors are often paid larger, less frequent amounts. If these payments are not checked for super at the time they are made, it is easy to miss the new deadline.

Example

This example is illustrative only.

A contractor is classified as an employee for SG purposes and is paid through accounts payable.

On 3 October 2026, the business pays a $12,000 invoice that includes amounts subject to super. That date is the QE day. Super must reach the contractor’s super fund within 7 business days.

If payroll is notified late, the business may already be non-compliant.

The Real Issue Is Process

Most failures will not be deliberate. They will occur because:

• Payroll does not see contractor payments in time
• Responsibilities are unclear
• Accounts payable and payroll processes are not aligned

What You Should Review Now

Before 1 July 2026, businesses should review:

• Which contractors are subject to super
• How contractor payments are approved and processed
• Whether payroll sees SG-relevant payments before they are made
• Who is responsible for checking super at payment time

Important Notes

• From 1 July 2026, the Payday Super regime replaces the existing Superannuation Guarantee Charge statement process with a voluntary disclosure framework. Where super is paid late, an employer may make a voluntary disclosure before ATO assessment, which can significantly reduce uplift penalties. Under the new rules, late‑paid super amounts included in the Superannuation Guarantee Charge are generally deductible when paid. However, administrative uplift amounts, statutory penalties and any general interest charge remain non‑deductible.
• Superannuation for the June 2026 quarter is due for payment by 28 July 2026. Care should be taken to manage the cash flow impact of the superannuation regime change.

How Holman Hodge Can Help

Holman Hodge can assist with reviewing contractor arrangements, identifying Payday Super risks, and helping you put practical processes in place before 1 July 2026.

Please contact your Holman Hodge adviser if you would like assistance.