IS THE ATO OPENING A NEW FRONT ON ITS WAR ON UPES? ARE YOU PREPARED?
Is the ATO opening a new front on its war on UPEs? Are you prepared?
The ATO is introducing new changes for trustees as to their tax return obligations. These changes will have tangible implications for trustees and beneficiaries in managing their tax and financial affairs and we are seeing clients already turning their mind to these issues.
In case you missed it, the ATO advised in its “Coming up in ‘Tax Time 2027’” (see QC 106282) that:
“From 1 July 2027, there will be additional new labels in the distribution statement that are aimed at enhancing compliance and improving trust transparency. Key changes include:
reporting of unpaid present entitlements for beneficiaries to enable us to identify high-risk arrangements…”
This is part of the ATO’s continual yearning for further information as part of its compliance arsenal.
What does this practically mean for trustees and their beneficiaries?
The exact new labels are not yet known. We expect that the ATO might think about tracking year to year movements in UPE balances and whether a UPE was discharged, assigned, or released by the beneficiary. The ATO may ask questions of the trustee and/or beneficiary about the treatment applied in some circumstances.
Even if a UPE balance remains unchanged year to year, the ATO might be interested to understand the circumstances better and to ensure there is no reimbursement agreement or Division 7A integrity issue at play.
We also note the Government’s anticipated reforms to remove the grandfathering of pre-2009 UPEs and to mitigate the outcomes arising in Bendel. Recently, the Treasurer’s media statement dated 3 Sept 2026 said:
“Legislation to address implementation of the 2018 Budget measure on unpaid present entitlements that was announced but not enacted by the previous Government will be progressed separately.’’
Is it time to tidy up the balance sheet in advance of this increased scrutiny?
Smailes Krawitz assists taxpayers with tax advice and dispute assistance.
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