From piperalderman.com.au: The Full Federal Court’s decision in February 2025 established that an unpaid present entitlement (UPE) from a trust to a corporate beneficiary is not classified as a loan under section 109D(3) of Division 7A of the Income Tax Assessment Act 1936.

This ruling challenges 15 years of ATO administration regarding UPEs and has implications for the over 800,000 discretionary trusts in Australia, although it does not exempt all UPE arrangements from triggering tax obligations.

Taxpayers are advised to review prior arrangements, consider objections to past assessments, and await potential administrative solutions from the ATO as the legal and bureaucratic ramifications unfold.