From kpmg.com: The Full Federal Court ruled that an unpaid present entitlement to income or capital of a trust estate is not considered a “loan” under section 109D(3) of the Income Tax Assessment Act 1936, overturning the Tax Commissioner’s long-held position since 2010.

This decision is particularly significant for privately held groups using discretionary trusts and those assessed for tax penalties based on UPEs.

Stakeholders are advised to monitor potential responses from the Commissioner, including possible appeals to the High Court or legislative changes.