Section 100A trust reviews

Section 100A of the Income Tax Assessment Act 1936 (ITAA 1936) is an integrity rule for trust distributions. If a beneficiary's entitlement to trust income arises out of a "reimbursement agreement", the beneficiary is treated as never having been entitled and the trustee is generally taxed on that income at the top marginal rate.

There is no time limit on the ATO amending an assessment to apply s 100A. We act for trustees, beneficiaries and family groups in section 100A reviews, from the first ATO letter through to objection and appeal, working alongside the trust's accountant. This is part of our wider work on ATO audits, reviews and objections.

What does section 100A do?

A beneficiary whose present entitlement to a share of trust income arose out of a reimbursement agreement, or anything done in connection with one, is deemed not to be, and never to have been, presently entitled to it (s 100A(1)). A similar rule covers income paid to or applied for a beneficiary (s 100A(2)). As no beneficiary is then presently entitled to that share, the trustee is assessed on it under s 99A (ATO ruling TR 2022/4, para 37), without the s 99A exceptions for deceased estates and some other trusts (s 100A(4)).

• It applies automatically. Unlike Part IVA, s 100A needs no determination by the Commissioner (TR 2022/4, para 45).
• It may catch only part of an entitlement. Where the agreement increased a beneficiary's entitlement, the excess is treated as arising out of it (s 100A(5)).
• Beneficiaries under a legal disability are outside it, generally including those under 18 (s 100A(1)(a); ATO guideline PCG 2022/2, para 10).

What is a section 100A reimbursement agreement?

TR 2022/4 sets out four requirements, all of which must be met (para 5).

1. An agreement connected with the entitlement. "Agreement" includes any arrangement or understanding, formal or informal, express or implied, enforceable or not (s 100A(13)). It can be inferred from conduct (para 10), but must exist when or before the entitlement arises. An expectation of a later arrangement isn't enough, although conduct before and after can help show an agreement already existed (para 16).
2. A benefit to someone other than the beneficiary. The agreement must provide for money, property, services or other benefits for another person (s 100A(7)). Loans count (s 100A(10)), and so does an agreement to release, not demand or postpone payment of a debt (s 100A(12)). In the ATO's view, an understanding that a beneficiary won't call for their entitlement is enough (para 18).
3. A tax reduction purpose. At least one party must have entered into the agreement for a purpose, not necessarily the main one, of someone paying less income tax (s 100A(8)–(9)). The ATO says an adviser's purpose can count, and so can a purpose of deferring tax (paras 23–24).
4. Not ordinary family or commercial dealing. An agreement entered into in the course of ordinary family or commercial dealing isn't an "agreement" for s 100A at all (s 100A(13)).

What is ordinary family or commercial dealing?

This exception is often the centre of a s 100A review. In the ATO's view (TR 2022/4, paras 25–32):

• the test is objective, and the whole dealing must be ordinary, not just each step,
• a dealing that is artificial, contrived, overly complex or has unnecessary steps points against it,
• if the objective can properly be explained as paying less tax to maximise group wealth, it isn't ordinary dealing,
• dealings between family members aren't automatically ordinary, and
• a dealing not at arm's length can still be commercial.

That is the ATO's reading. The courts have the final say, and each case turns on its facts.

What do TR 2022/4 and PCG 2022/2 say?

The ATO's interpretation is in Taxation Ruling TR 2022/4, dated 8 December 2022 and amended by an addendum of 27 September 2023 to reflect the Full Federal Court's decisions in Guardian and B&F Investments (TR 2022/4A1; see paras 11, 54(d) and 54A). It applies to past and future arrangements, except where it conflicts with the terms of a settlement agreed before it issued (para 43).

Both TR 2022/4 and PCG 2022/2 are flagged on the ATO's legal database as under review following the High Court's 2026 decision in Commissioner of Taxation v Bendel [2026] HCA 18, about unpaid trust entitlements and Division 7A. The ATO has said it will review them to decide whether any amendments or withdrawals are needed (Decision impact statement, Bendel, 26 June 2026, para 44), so check for updates before relying on them. In the same statement, the ATO said it will no longer treat a company beneficiary's unpaid entitlement as a Division 7A loan just because the company leaves it unpaid, but section 100A may still apply if the entitlement arises out of an arrangement that meets the s 100A requirements (paras 27, 33, 36). See Division 7A reviews.

Its compliance approach is in Practical Compliance Guideline PCG 2022/2, which sorts arrangements into risk zones (para 13):

Zone	What it covers	ATO approach
White	Arrangements entered into in income years that ended before 1 July 2014	No new s 100A compliance activity, unless the ATO is already examining those years or the arrangement continues after that date (para 16)
Green	Listed low-risk scenarios	Only confirming the scenario's features are present
Red	Listed high-risk scenarios	Priority analysis, and audit where appropriate

Green zone scenarios include family members who receive their distribution and use it for themselves, their spouse or dependants; entitlements paid within 2 years and used by the beneficiary; and funds left with the trustee as business working capital or for trust investments, on conditions (paras 20–30). An arrangement drops out of the green zone if, for example, the beneficiary gifts the money on, releases the entitlement or has it set off against a dividend the beneficiary pays (para 32).

Red zone scenarios include (paras 34–48):

• an adult child's entitlement paid to a parent for expenses from before the child turned 18,
• a trust distributing to a company it owns shares in, which pays a franked dividend back out of that income, year after year,
• units issued to a beneficiary and set off against the unpaid entitlement, at more than market value or under a unilateral power to issue them,
• deliberate steps, such as deed amendments, that make a beneficiary's taxable share much larger than its actual entitlement, with the difference kept by someone who would pay more tax, and
• beneficiaries with losses outside the family group, and arrangements covered by a Taxpayer Alert that raises s 100A.

A red-zone rating doesn't mean s 100A applies, and being outside the zones doesn't mean the risk is high (paras 15 and 33).

For example, suppose a trust makes a 19-year-old student entitled to $100,000. If the student receives and uses the money for their own living and study costs, that is generally green zone. If it goes to the parents to repay school fees from when the student was 15, the ATO treats it as red zone.

What have the courts said about section 100A?

B&F Investments Pty Ltd as trustee for the Illuka Park Trust v Commissioner of Taxation [2023] FCAFC 89. A trust received about $10 million from a share buy-back, a dividend for tax purposes but capital under the deed. After the deed's definition of income was changed, a newly incorporated company was made entitled to the trust's income, while the proceeds stayed in the trust. On appeal it was accepted this wasn't ordinary dealing, so the argument was about purpose (paras 23–24). The Full Court held s 100A applied, so the trustee was taxable, and for that reason allowed the beneficiary company's appeal against its own alternative assessment (paras 7–9).

Commissioner of Taxation v Guardian AIT Pty Ltd ATF Australian Investment Trust [2023] FCAFC 3. A trust distributed to a corporate beneficiary, which later paid franked dividends back to the trust, and those were distributed to a non-resident beneficiary. The Full Court held s 100A didn't apply for the year under appeal, because on the evidence there was no agreement to pay the dividend back when the entitlement arose. But Part IVA did apply to that year, supporting the Commissioner's alternative assessment of the individual behind the group (paras 4 and 7). The findings rested heavily on witness evidence the primary judge accepted (para 9).

The lessons: timing and evidence of what was agreed are critical, and the ATO may run s 100A with other provisions in the alternative, as it did in both cases. See Part IVA in ATO disputes.

How far back can the ATO apply section 100A?

There is no time limit. The usual 2 and 4 year limits don't prevent an amendment, at any time, to give effect to s 100A (ITAA 1936 s 170(10), table item 17). In practice, PCG 2022/2 says the ATO generally won't start new s 100A compliance activity for income years that ended before 1 July 2014, with some exceptions (para 16). See how far back the ATO can audit.

On an amended assessment, shortfall interest charge (SIC) generally runs from the original due date for payment until the day before the ATO gives notice of the amendment (Taxation Administration Act 1953 (TAA), Sch 1 s 280-100), so for an old income year it can be substantial. General interest charge (GIC) then runs on anything left unpaid. Neither SIC nor GIC can be deducted in income years starting on or after 1 July 2025 (Income Tax Assessment Act 1997 s 26-5(1A); Treasury Laws Amendment (Tax Incentives and Integrity) Act 2025, Sch 2 item 4). SIC arises when the assessment is amended, so SIC on a s 100A amendment made now is generally not deductible, even though it is calculated over earlier years. The ATO can remit SIC where it considers it fair and reasonable (Sch 1 s 280-160). See shortfall interest charge and remission.

How does the ATO review trust distributions under section 100A?

A review generally starts with a letter or questionnaire about the trust's distributions for particular years: who the beneficiaries were, whether and when each entitlement was paid, who used the money, and any loans, gifts, set-offs or deed changes. PCG 2022/2's record-keeping list (para 50) is a good guide to what the ATO is likely to ask for, including the deed and amendments, trustee resolutions, contemporaneous notes, payment records and loan agreements.

The ATO can also require information, documents or attendance to give evidence by formal notice (TAA Sch 1 s 353-10), and often sets out its view in a position paper before amending. In the ATO's view, if s 100A applies to a company beneficiary's entitlement, there is no unpaid entitlement for Division 7A to apply to (TR 2022/4, para 38). See Division 7A reviews.

How to respond to a section 100A review

1. Gather the records first. Trace each entitlement from the resolution to where the money ended up before answering detailed questions.
2. Test each requirement against the facts. Was there an agreement when the entitlement arose? Can the whole dealing be explained by family or commercial objectives?
3. Check the PCG zones. If you rely on the green zone, document how each feature is met (PCG 2022/2, para 18).
4. Be careful with explanations of purpose. Early explanations are hard to walk back. Legal professional privilege may protect confidential legal advice, so check before handing over files.
5. Answer the position paper on the law and the evidence. See responding to a position paper.
6. Consider disclosure early. A voluntary disclosure in the approved form generally reduces the base penalty by 80% if made before the ATO tells you it will examine your affairs. After that, a disclosure that saves the ATO significant time or resources generally earns a 20% reduction, although the ATO can treat it as made earlier where appropriate (TAA Sch 1 s 284-225). See voluntary disclosures.

Can you object to a section 100A assessment?

For an amended assessment, the objection deadline is generally the later of 60 days after the notice is served and the end of the original 2 or 4 year period, counted from the notice of the original assessment (TAA s 14ZW(1B), (1BA)). As s 100A amendments often come years later, the 60 days is likely to be the deadline that matters. An objection to an amended assessment is limited to the changes it made (s 14ZV). A late objection needs a written request explaining the delay, and the ATO decides whether to accept it (ss 14ZW(2)–(3), 14ZX).

If the ATO has issued alternative assessments, for example to the trustee under s 100A and to a beneficiary under another provision, consider objecting to each so the same income isn't taxed twice, as the beneficiary company did in B&F Investments.

If the objection is disallowed, you can generally apply to the Administrative Review Tribunal or appeal to the Federal Court within 60 days after you are served with the decision (TAA ss 14ZZC, 14ZZN). You are usually limited to your objection grounds and must prove the assessment excessive or otherwise incorrect and what it should have been (ss 14ZZK, 14ZZO). See ATO objections.

Next step

Send us the ATO's letter or questionnaire, the trust deed with any amendments, the distribution resolutions for the years under review and a short note of how each beneficiary's entitlement was paid and used. If amended assessments have issued, include the notices so we can confirm your objection deadlines on the first call.