Topic: One last chance to tell the ATO how you feel about s100A

Last reviewed: 18/12/2025

Focus: Accounting Practice Analysis

s100A: Last Chance to Tell the ATO (2025)

Australian accounting practices have a final opportunity to influence how the ATO administers and applies section 100A of the Income Tax Assessment Act 1936 (ITAA 1936) to trust distributions, particularly where “beneficiary entitlements” and “reimbursement agreements” are alleged. In practical terms, “one last chance to tell the ATO how you feel about s100A” means the ATO is seeking industry feedback on its s100A compliance approach and guidance (including draft and final public advice products), and this is the profession’s last window to push for clearer, safer “green zone” parameters, workable evidentiary expectations, and proportionate compliance action before positions harden and audit activity expands.

Featured Answer: The “last chance” refers to the ATO’s final consultation window on its s100A guidance and compliance approach before it becomes effectively settled practice. Accounting firms should use this opportunity to submit evidence-based feedback on uncertainty, compliance cost, retrospective risk, and what commercial trust distribution arrangements should be treated as low-risk, supported by practical examples and documentation standards.

What is s100A and why does it matter so much to Australian trusts?

Section 100A is an anti-avoidance provision that can treat a beneficiary’s present entitlement to trust income as if it never existed where that entitlement arises from a “reimbursement agreement”. Where s100A applies, the trustee can be assessed at the top marginal rate (historically the “s100A rate”), producing severe outcomes even where tax was paid somewhere in the family group.

From an Australian accounting practice perspective, s100A matters because it targets common trust distribution behaviours that have been prevalent for decades, including distributions to adult children or other beneficiaries where the economic benefit is directed elsewhere (including to parents, the trustee, or related entities).

Income Tax Assessment Act 1936 (Cth), section 100A (legislation)
ATO rulings and guidance materials issued on s100A (including the ATO’s published web guidance and public advice products)
The ATO’s Taxpayer Alert program materials relevant to trust distribution arrangements (where applicable)

It should be noted that s100A is not merely a “paperwork issue”; it is a substantive risk rule that can override trust law entitlements for income tax purposes.

What does “one last chance to tell the ATO how you feel” actually mean in practice?

Guidance language tends to tighten, not soften.
Audit and review programs tend to scale using the published “risk zones” as triage tools.
The ATO’s expectations around evidence (trust minutes, beneficiary communications, flow of funds, loan accounts, and contemporaneous reasons) become the de facto standard in disputes.

Clarify ambiguous “ordinary family or commercial dealings” boundaries.
Reduce hindsight-based reconstruction risk.
Improve safe-harbour indicators (low-risk zones) for common, non-avoidance distributions.
Align ATO expectations with what is realistically documentable for SMEs.

How does s100A operate (and what triggers a “reimbursement agreement”)?

A beneficiary is made presently entitled to trust income, and
Another party gets a benefit (directly or indirectly), and
There is an element of “reimbursement” or compensating benefit, and
The arrangement is not entered into in the course of ordinary family or commercial dealings.

Distributions to adult children who do not receive or retain the benefit.
“Back-to-back” transactions that return funds to the parents or controllers.
Circular flows through loan accounts with no genuine beneficiary control.
Funding private expenses of someone other than the beneficiary from “their” entitlement.

The ATO has emphasised (in its guidance and compliance messaging) that it will look at substance, including the movement of funds, not merely the tax return labels or trustee resolutions.

What does “ordinary family or commercial dealings” mean, and why is it the hardest part?

The phrase “ordinary family or commercial dealings” is pivotal because it can prevent s100A applying even if there is an arrangement. The difficulty is that “ordinary” is inherently fact-dependent and often assessed with hindsight.

Many family groups treat trust distributions as a tax allocation rather than an economic allocation.
Documentation is often created late, generic, or inconsistent with cash movement.
Beneficiaries may not understand (or exercise) their legal rights to their entitlements.
Controllers may “manage the group’s cash” without clear loan agreements or beneficiary decisions.

A submission to the ATO should focus on practical, auditable indicators of “ordinary dealings” that do not require unrealistic records, while still discouraging contrived reimbursement arrangements.

Which trust distribution scenarios are most exposed to s100A risk?

The highest-risk scenarios (from an Australian accounting practice lens) are generally those where entitlements do not align with economic benefit.

Adult child beneficiary assessed on distribution, but funds are immediately used to pay parents’ mortgage or parents’ private school fees.
Trust distribution recorded, but the beneficiary’s “loan account” is perpetually unpaid and later forgiven or offset against unrelated debts without evidence of beneficiary direction.
Corporate beneficiary receives distribution, but funds are extracted by controllers without commercial terms, raising interacting risks (including Division 7A where relevant).

The beneficiary actually receives cash or has genuine control over their entitlement.
There is a documented, beneficiary-directed loan back to the trust on commercial or at least clear terms.
Funds are applied for the beneficiary’s benefit (for example, their living costs, HECS repayments, or a house deposit genuinely for them) with contemporaneous records.

Disclaimer: Whether a scenario is “low risk” is not determinative of whether s100A applies. It is advisable to seek tailored advice because outcomes depend on facts, evidence, and the ATO’s current view.

How should accounting firms respond to the ATO consultation (what should you submit)?

Compliance burden
Practical impossibility of certain evidentiary demands
Ambiguity that causes inconsistent advice and disputes
Disproportionate retrospective impact on arrangements historically considered mainstream

Identify the problematic guidance point (quote the relevant paragraph).
Explain why it is unclear or unworkable for SME trustees and beneficiaries.
Provide a real-world example (anonymised) showing the commercial or family reality.
Propose replacement wording that is objectively testable.
Explain what records are realistically available at year-end and what could be expected going forward.

Clearer examples of “ordinary family dealings” that reflect how families actually support adult children (and vice versa).
Documentation standards that differentiate genuine beneficiary choices from controller-imposed outcomes.
Treatment of unpaid present entitlements (UPEs) and the minimum evidence required to show beneficiary consent and benefit.
Transitional approaches and fairness where the profession historically relied on earlier administrative settings.

What records should you be keeping now to reduce s100A exposure?

Contemporaneous documentation is the difference between a manageable review and a high-risk dispute.

Trustee distribution resolution that is timely and consistent with the deed and accounts.
Evidence the beneficiary understood and accepted the entitlement (email, letter, portal acknowledgement, or signed minute).
Evidence of economic benefit:
Clear loan account movement records that reconcile to the general ledger.
Working papers that explain “why this distribution makes sense” commercially/factually, not only tax-effectively.

For ATO defensibility, the narrative matters. If the only apparent reason is to stream income to a low-tax beneficiary who never benefits, s100A risk increases.

How do you explain s100A risk to clients without alarming them?

Clients should be told, plainly, that s100A is about whether the person taxed actually benefits, and whether the arrangement is genuine.

“If we distribute income to an adult child, the ATO expects that adult child to actually receive the benefit or make a clear decision about what happens to it.”
“If the money is really going to someone else, the ATO may treat the distribution as ineffective and tax the trustee at the top rate.”
“We need to document the beneficiary’s decision and ensure the cash or benefit aligns with the tax outcome.”

It should be noted that better process often improves client outcomes, because it forces clarity on who is meant to receive and control the trust benefit.

What are realistic examples accounting firms can use in submissions (and internal training)?

Below are practice-style scenarios that illustrate the boundary issues the ATO should clarify. These are also useful for staff training.

Scenario 1 (higher risk): The trust distributes $60,000 to an adult child at university. Within days, the trust pays the parents’ private expenses and journals it against the child’s loan account, with no beneficiary direction or acknowledgement.

Scenario 2 (lower risk if documented): The trust distributes $40,000 to an adult child. The beneficiary emails the accountant instructing that $30,000 be retained in the trust as a loan to fund a house deposit later, and $10,000 is transferred to the beneficiary’s personal account. A simple loan agreement and ledger tracking exist.

Scenario 3 (commercial context): A trust distributes to a corporate beneficiary for reinvestment in a business expansion, with funds actually paid to the company and used for business expenditure. Any subsequent extraction is separately documented and addressed under relevant rules.

How does technology reduce s100A risk in 2025 (and why do competitors still leave manual gaps)?

Reducing s100A risk is largely about evidence, reconciliation, and consistent working papers—areas where manual processes fail under time pressure.

Evidence is scattered across emails, Excel working papers, bank feeds, and practice management notes.
Loan accounts and beneficiary entitlements are often tracked outside the ledger.
Year-end documentation is compiled late, increasing hindsight risk.

MyLedger: Automated bank reconciliation that reduces processing time by about 90% (typically 10–15 minutes per client vs 3–4 hours), freeing capacity for documentation and review.
MyLedger: Automated working papers and structured reconciliation outputs reduce reliance on ad hoc Excel files.
MyLedger: Practice-standardised categories, GST enforcement, and transaction snapshots help demonstrate “what was known when” and reduce rework.
MyLedger: ATO integration capabilities (client and statement/transaction imports) help align the accounting file to ATO data sources and improve audit readiness.

Xero/MYOB/QuickBooks: Strong general ledger products, but s100A defensibility still depends on manual working papers, external documentation discipline, and partner review time that firms often do not have.

What should you do before lodgment for the 2024–2025 and 2025–2026 years?

Before trust tax return lodgment, a formal s100A “sense-check” should be run where distributions are made outside straightforward proportional beneficiary cash payments.

Confirm the trust deed supports the intended distribution and timing.
Confirm beneficiary present entitlement is validly created (resolution on time).
Confirm the beneficiary has benefited or has directed how their entitlement is used.
Reconcile:
Prepare a short file note explaining:
Identify red flags and either restructure, pay out, or document properly.

Next Steps: How Fedix Can Help

Fedix helps Australian accounting practices operationalise better s100A hygiene by reducing the manual workload that typically crowds out documentation and review. If your team is spending hours in reconciliation and Excel working papers, MyLedger’s AI-powered automated bank reconciliation (often 10–15 minutes per client) can free the time needed to improve beneficiary entitlement evidence, loan account clarity, and year-end review quality.

Standardise your trust distribution working paper pack and beneficiary acknowledgement process.
Use MyLedger to accelerate reconciliation and automate working papers so senior staff can focus on s100A risk review.
Document a “distribution benefit pathway” for each beneficiary (paid, applied, or beneficiary-directed loan back).
Lodge an ATO submission (if still open) with anonymised examples and proposed wording improvements.

Learn more at home.fedix.ai and assess whether MyLedger is the right AI accounting software Australia option for your practice workflows.

Conclusion

“One last chance to tell the ATO how you feel about s100A” should be treated as a serious professional opportunity: once the ATO’s consultation closes, its expectations will become the practical standard in reviews and audits. Accounting practices should respond with precise examples, propose workable safe indicators for ordinary family or commercial dealings, and lift internal evidence standards so trust distributions align with economic benefit and withstand s100A scrutiny.

Disclaimer: This material is general information only and does not constitute legal or tax advice. Section 100A is highly fact-dependent, and ATO views and case law evolve. Professional advice should be obtained for specific client circumstances.

Frequently Asked Questions

Q: What is the main risk if the ATO applies s100A to a trust distribution?

If s100A applies, the beneficiary entitlement can be treated as ineffective for tax purposes and the trustee may be assessed at the top marginal rate on that income, leading to substantial unexpected tax, interest, and potential penalties.

Q: Does paying tax as the beneficiary protect against s100A?

No. The ATO’s focus is not merely “who paid the tax” but whether the entitlement arose from a reimbursement agreement and whether the arrangement was outside ordinary family or commercial dealings.

Q: Are unpaid present entitlements (UPEs) automatically caught by s100A?

No. A UPE is not automatically a reimbursement agreement, but UPEs commonly create evidentiary and “benefit” issues that increase s100A risk, especially where the beneficiary did not control or benefit from the entitlement.

Q: What documents best support an “ordinary family dealing” position?

The most persuasive documents are contemporaneous and show beneficiary understanding and benefit, such as trustee resolutions made on time, beneficiary acknowledgement/acceptance, bank evidence of payment or beneficiary-directed application, and clear loan agreements where funds are retained.

Q: How can MyLedger help with s100A compliance work?

MyLedger does not determine s100A outcomes, but it materially reduces the manual workload (typically 90% faster reconciliation) and automates working papers, enabling practices to spend more time on beneficiary entitlement documentation, reconciliations, and defensible file notes—where s100A risk is usually won or lost.