Updated 31 August 2026
Arrangements entered into before 1 July 2004 sit in the white zone of PCG 2022/2. The ATO has said it will not dedicate compliance resources to them, other than to confirm the arrangement genuinely predates that date and has not materially changed.
Zones reflect PCG 2022/2 and the ATO's post-Bendel guidance as at 31 August 2026. This checker classifies risk indicators only. It cannot decide whether an arrangement is an ordinary family or commercial dealing, and only the ATO or a court can apply section 100A. General information only, not advice.
Section 100A of the Income Tax Assessment Act 1936 targets reimbursement agreements: arrangements where a beneficiary is made presently entitled to trust income, the real benefit flows to someone else, and a purpose of the arrangement is that someone pays less tax. If it applies, the beneficiary's entitlement is ignored and the trustee is assessed at the top marginal rate, currently 45% plus Medicare levy. Ordinary family or commercial dealings are excluded, and that phrase carries most of the weight in every dispute.
Two features make it the most serious integrity rule for family trusts. There is no amendment time limit, so the ATO can reach back past the usual 2 and 4 year periods. And it is the trustee that wears the assessment, which turns one year's distribution strategy into a trust-level liability.
PCG 2022/2 sets out how the ATO allocates its compliance resources. It does not change the law, it tells you who gets looked at.
| Zone | What sits in it | ATO approach |
|---|---|---|
| White | Arrangements entered into before 1 July 2004 | No compliance resources applied |
| Green | Beneficiary genuinely receives and uses their entitlement, ordinary family dealings | No compliance resources expected |
| Blue | Everything that is neither green nor red | May review, case by case |
| Red | Circular flows, entitlements the beneficiary never sees, low-rate beneficiaries funding high-rate family members | Likely to review, s100A likely to be considered |
The pattern in the green zone is simple: the person entitled to the money ends up with the money. The spouse who spends the distribution on family living costs. The adult child whose entitlement is paid into their own account and stays there. The corporate beneficiary that is actually paid and pays tax on the income. Entitlements applied against a beneficiary's genuine expenses, with records, also fit.
An entitlement still unpaid two years after the resolution is a standing question mark. It suggests the beneficiary never really had the benefit, which is both a section 100A indicator and, where the beneficiary is a company that starts dealing with the funds, potentially a Division 7A issue even after Bendel.
A trust distributes $45,000 to a 19 year old university student. The same week, the student transfers $45,000 to their parents to help with the mortgage. The student was entitled, the parents got the benefit, and the family saved the gap between the student's rate and the parents' rates. Run it through the checker: paid yes, kept no, gifted back yes, lower rate yes. That is the red zone fact pattern PCG 2022/2 describes. Change it so the student keeps the money for rent and fees, and the same distribution sits in the green zone.
We review trust distribution patterns against PCG 2022/2, document the ordinary dealing position, and fix UPE and Division 7A overlaps. Beneficiary decisions stay yours, evidence becomes ours.
Talk to National AccountsYes. Section 100A assessments are excluded from the standard amendment periods, so there is no time limit where a reimbursement agreement existed. That is why red zone arrangements are worth fixing even if the years feel closed.
No. Distributing to adult beneficiaries is how discretionary trusts are meant to work. The risk arises when the child never sees the money or hands it straight back. If they receive and use their entitlement, that is the green zone.
No. Bendel was about Division 7A, holding that an unpaid present entitlement is not itself a loan. The ATO's decision impact statement of 26 June 2026 confirms section 100A remains fully available, and many expect the ATO to lean on it harder now.
A distribution resolution signed on or before 30 June, bank evidence the entitlement was paid or applied for the beneficiary, and where funds covered a beneficiary's expenses, something tying the spending to them. Contemporaneous beats reconstructed every time.
The Government has announced a proposed 30% minimum tax on discretionary trust income from 1 July 2028. It is not yet law, but it changes the value of corporate beneficiary structures and should be part of any distribution planning now.
General information only. It does not consider your circumstances and is not tax, legal or financial advice. Only the ATO or a court can determine whether section 100A applies. Liability limited by a scheme approved under Professional Standards Legislation.
