Why key thresholds in trust taxation are better set by Parliament than left to administrative guidance — and what a recent High Court decision shows about the risk of relying on the latter.
The ATO regularly issues administrative guidance — determinations, rulings, practical compliance guidelines — to explain how it will apply the law in practice. That guidance is genuinely useful for taxpayers day-to-day. But it isn't the law itself, and where guidance drifts from what the underlying statute actually supports, taxpayers who relied on it can be left exposed.
Commissioner of Taxation v Bendel [2026] HCA 18 — The High Court held that an unpaid present entitlement owed to a corporate beneficiary is not a "loan" for Division 7A purposes, meaning the ATO's prior administrative position (TD 2022/11) had extended beyond what the statute supported. The lesson: where a threshold genuinely matters to taxpayers' planning, it belongs in the statute, not in guidance that can be reinterpreted.
The Exposure Draft for the proposed minimum tax doesn't include a general income floor at all. As we've set out in our Minimum Tax analysis, Treasury's own operative provisions list a specific, exhaustive set of exclusions, and nowhere in that list is there a dollar figure or general concept of a "modest" trust. If a threshold is eventually introduced, the Bendel decision is a direct warning about how it should be done. A threshold left to administrative guidance, rather than fixed in the statute itself, can later be found to have gone further than the law actually allows, and taxpayers who planned around that guidance are the ones left carrying the consequences. That's exactly why our recommended $100,000 to $150,000 threshold is framed as a statutory amendment, not a request for an ATO ruling or determination.
The minimum tax threshold isn't the only place this pattern matters. The ATO's Practical Compliance Guideline PCG 2022/2, for example, sorts trust distributions into risk zones, with "Green Zone" arrangements treated as low-risk and unlikely to attract compliance attention. That guidance is genuinely useful day to day, but it's an administrative risk-rating framework, not a legislated safe harbour. It can be withdrawn or narrowed by the ATO at any time, and taxpayers who've structured their arrangements around it have no statutory entitlement to rely on it continuing to apply the same way in future.
The broader pattern is the same one Bendel exposed: the ATO can hold an administrative position for years, taxpayers can reasonably plan around it, and it can still turn out, once tested in court, to have extended beyond what Parliament actually legislated.
None of this is an argument against administrative guidance itself, which genuinely helps taxpayers understand how the law applies day to day. It's an argument about where the important lines should sit. Thresholds, exclusions, and other figures that materially change a family's tax outcome, the kind of thing a modest, long-established trust needs to plan around for years, belong in the statute Parliament actually passes, where they can only be changed by Parliament. Administrative guidance should explain how the law works, not quietly stand in for provisions the law was never actually written to contain.
