While most developed countries levy an inheritance tax against a deceased estate, Australia does not. However, there are still tax responsibilities that come when dealing with a deceased estate. These tax responsibilities fall onto the executor’s shoulders, but you should look to the deceased estate lawyers for guidance.
What Is an Executor?
The Will’s executor is the person who holds the overall responsibility for carrying out the deceased’s final wishes. This role is governed by the Succession Act for each state or territory in Australia.
The executor first must read the Will once they have located and collected it. From there, they have many duties to discharge. These duties include organising the funeral as described in the Will, getting probate from the relevant court, confirming the estate, paying debts, settling the tax responsibilities, and identifying and distributing the estate. Getting probate is a legal step where the relevant court will recognise a Will as being valid and legal. It’s an essential step you must take. You must complete this before any property is sold or assets distributed. It is the executor’s responsibility to protect the estate. Likewise, an executor is charged with defending the estate in the event of a Will dispute.
What Tax Responsibilities Does an Executor Have?
Upon death, the deceased is treated as a separate taxpayer to their estate. The executor needs to apply for a Tax File Number for the estate. Certain additional responsibilities come with the title of executor.
Firstly, the executor needs to notify the Australian Tax Office of the taxpayer’s death. They also need to file outstanding income tax returns, if there are any, lodge the date of death return, and lodge any additional outstanding tax documents. This includes Instalment Activity Statements or Business Activity Statements. Additionally, the executor needs to cancel the deceased’s Australian Business Number and Goods and Services Tax registration if applicable. It’s also necessary to discharge related tax liabilities.
The executor must lodge the deceased estate trust’s income tax returns and discharge related tax liabilities concerning the estate. It may also be necessary to provide beneficiaries with information about what should be filed in their personal tax returns. In some cases, the executor must pay tax from the estate but on behalf of the beneficiaries.
What Can Happen If Taxes Are Not Paid?
If the executor fails in their responsibilities to pay the correct taxes, they can be held personally liable for any unidentified tax obligations or unpaid tax debt. This most commonly occurs when the assets were distributed to the beneficiaries before the executor dealt with tax obligations.
If you are both an executor and a beneficiary, it might be necessary to declare these assets on your personal tax return.
The executor, to protect themselves, should first locate the last tax return the deceased lodged. It will provide you with their ATN and give you an idea of how up-to-date the information is. When did they last file a return, is there a trust, is there an outstanding return, did they sit on a board of directors? This information will help you understand your obligations. From there, you can speak to the accountant or tax agent who handled their tax affairs. If they didn’t have help or you can’t locate the person, notify the taxation office that you have been appointed as the executor of the deceased’s estate.
Can Family Members Contesting a Will Affect Tax Responsibility?
From an executor’s perspective, the initial tax responsibilities should be complete. The tax responsibilities are what they are, regardless of Will disputes, as they are addressed first. That is an early step in the executor’s journey to wind up an estate. However, if the challenge to the Will is successful, it will change the way assets are distributed.
It may mean the assets are split between more people. Or, it could mean that someone receives a larger share than initially anticipated. Either way, this could impact who is due to pay what taxes in their own filing and, that is down to the executor to explain. It’s a delicate process, which is why it’s always wise to enlist the services of an accountant and Will and Estate Lawyers. They understand the law and requirements, and they can guide you through the process.
When To Seek Legal Help
Whether you are executing a Will or challenging a Will, it’s always wise to have a firm of reputable Will and Estate Lawyers on your side. As an executor, your responsibility is to execute the Will as it is written. This can result in Will and Estate disputes for all manner of reasons, whether you do the job correctly or not. Estate litigation lawyers can represent either side when contesting a Will. At AJB Stevens, we can help you challenge a Will you believe has been unfairly executed. Or if you feel as though you were wrongly excluded.
