The Inspector-General of Taxation and Taxation Ombudsman (IGTO), Ms Karen Payne, today released the report of her investigation into ATO systems and processes for dealing with deceased estates - Death and Taxes: An Investigation Into Australian Taxation Office Systems And Processes For Dealing With Deceased Estates. Ms Payne highlighted the sensitivities in this particular area of Australia’s taxation system.

“We recognised that the death of a loved one is a difficult time for many people, no matter how ‘organised’ we may think we are. It is especially so for those close to the deceased. Not only can it be sad but it can also be stressful and confusing – even sometimes overwhelming,” she said. “This is especially true for a surviving spouse who is suddenly required to address many financial, tax, legal and accounting issues … alone. Hence, it is a vital area for investigation and ensuring clarity and simplicity within the system itself.”

Ms Payne said the Inspector General of Taxation’s investigation sought to identify opportunities to improve tax administration for deceased individuals and their estates, aimed at making it easier to engage with the ATO, and to reduce unnecessary red tape and tax compliance.

“The end-of-life processes generally should ideally recognise this is a difficult and emotionally stressful time.  Hence, in our Report we make 10 recommendations that should assist a surviving spouse and grieving family and their representatives to more easily navigate the tax administration system at this difficult time,” Ms Payne said.

She said the ATO had agreed in full, agreed in part, and agreed in principle with the vast majority of the recommendations.

Key Findings & Recommendations – Deceased Estates and ATO

Australian Bureau of Statistics (ABS) data shows that more than 80% of deceased individuals are over the age of 65 at their time of death. Furthermore, other sources suggest 45% of Australians die intestate – without a valid will.

Based on this data it follows intuitively, according to the IGTO’s analysis, a deceased’s recent interactions with the tax system may have been limited but interactions with other agencies, such as Services Australia (which includes Medicare) may have been frequent. Hence, the report recommends that the ATO explores opportunities to collaborate with other agencies and service providers to simplify the end of life experience and reduce red tape and compliance, for example in relation death notification and current address and contact details.

A further significant recommendation to facilitate matters for deceased estates would be to allow digital notification of death including by registered tax practitioners.

Deceased Estate Complaints to IGTO since 1 May 2015

Since 1 May 2015, the IGTO has, as the Taxation Ombudsman, received approximately 130 complaints in the area of deceased estates. The issues raised in these tax complaints canvass a range of concerns including:

  • Lack of clarity as to why a grant of probate or letters of administration from a Court is necessary for authority to engage with the ATO – to provide or receive the deceased taxpayer’s information;
  • Difficulties for tax agents accessing information of the deceased taxpayer or dealing with tax matters on behalf of the deceased;
  • Delay by the ATO in providing executors with access to unclaimed superannuation;
  • ATO requirements for lodgement of the deceased taxpayer’s past tax returns;
  • Executor/Administrator confusion in relation to how the tax affairs of the deceased should be handled;
  • Lack of ATO guidance and advice for deceased estates;
  • Delays in obtaining a Tax File Number for the deceased estate;
  • Delay in registering the death of the taxpayer following notification; and
  • Uncertainty regarding how a foreign executor should deal with the affairs of the taxpayer in Australia.

Tax System Administration Issues raised in this Review

There have been various other examples raised with the IGTO as part of this review, including where the tax administration system is not working simply, easily and without unnecessary compliance and red tape. Examples include:

  • Accessing ATO information
  • Accessing MyGov information and communications
  • Do I need to get probate to engage with the ATO?
  • Why the need to file a trust return? Why two different returns?
  • Getting a Tax file number for the deceased estate
  • Getting a refund of franking credits.

Recent Improvements by ATO

The ATO has made some tax administration improvements (including since this review commenced) that seek to assist representatives of a deceased individual and their estate. These improvements are helpful and welcome by the tax and legal community. However, for these improvements to apply, the legal personal representative must have a grant of probate or letters of administration. For example:

  • 22 August 2018 - Practical Compliance Guideline PCG 2018/4 - Income tax - liability of a legal personal representative of a deceased person;
  • December 2019 - ATO announced that it had developed a deceased estate data package which can be made available to LPRs (after a grant of probate or letters of administration). The data pack includes the deceased taxpayer’s asset and income information (where it exists);
  • 13 January 2020 (effective from 15 May 2020) – Legislative Instrument pursuant to the Commissioner’s Remedial Powers, to permit disclosure of tax information to additional ‘covered entities’ – namely registered tax agents, BAS agents and legal practitioners appointed by the LPR with a grant of probate or letters of administration.

“Where State and Territory laws are designed to reduce red tape and compliance to finalise the administration of the estate (for example, by permitting informal administration of estates in some circumstances such as simple estates or sometimes for real property transferring to named beneficiaries), the tax administration system interactions should ideally augment these outcomes,” Ms Payne said.

She emphasised that this is why it is especially important for tax administration improvements to work both when there is and when there is no requirement to obtain probate and letters of administration.

For Further Information

Our full review report, a short summary of our report as well as the ATO's response to our review are available in our Completed reviews.

Media Relations Contact for Office of the Inspector-General of Taxation and Taxation Ombudsman 
Marjorie Johnston – Wordmakers 
Mobile: 0407 329 430 

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