The ATO has recently released a guideline that will allow certain legal personal representatives (LPRs), including executors or administrators, of less complex estates to finalise those estates before the expiration of the relevant review period without concern that they may have to fund an outstanding tax-related liability of the deceased person from their own assets. This will enable quicker resolution of certain deceased estates, subject to qualifying conditions.

For this guideline to apply, the LPR should have obtained probate of a deceased person’s will or letters of administration of a deceased person’s estate, and the deceased person’s estate must be “less complex”. To be considered “less complex”, all of the following must apply to the deceased estate:

• in the 4 years before the deceased person’s death the deceased: did not carry on a business; was not assessable on a share of the net income of a discretionary trust; and was not a member of a SMSF.
• the assets of the deceased person’s estate consist only of: public company shares or other interests in widely held entities; superannuation death benefits; Australian real property; cash, cash investments and any other personal assets such as cars, jewellery and home contents.
• the total market value of the assets of the deceased person’s estate was less than $10m as at the date of the deceased person’s death.
• None of the assets of the deceased person’s estate pass to: a foreign resident; a trustee of a complying super entity; or a tax exempt entity (ignoring assets that are testamentary gifts of property where s 118-60 of the ITAA 1997 applies to disregard the capital gain).

An LPR will be personally liable for any amounts that the deceased owed to the ATO at the date of their death if they had notice of any such amounts from the ATO prior to the distribution of estate assets but proceeded to distribute the assets anyway. Under the guideline, the ATO will treat an LPR as not having notice of any further claim by the ATO relating to the tax returns lodged by LPR (or were advised as not necessary) if:

• the LPR acted reasonably in lodging all the deceased person’s outstanding returns (or in advising the ATO that they were not necessary). “Acted reasonably” in this context includes ensuring that the deceased person’s outstanding tax returns were lodged correctly, exercising sound judgment and acting with a degree of prudence. LPRs cannot “blindly” rely on a co-LPR, a solicitor or accountant; however, reliance on relevant written professional advice that they have sought on a particular matter may be relevant in establishing that an LPR has acted reasonably.
• the ATO has not given the LPR notice that it intends to examine the deceased person’s taxation affairs within 6 months from the lodgment (or advice of non-lodgment) of the last of the outstanding returns by the LPR.

It is important to note that the guideline does not deal with outstanding tax-related liabilities that an LPR may have in relation to the deceased estate (ie for the period after the death of the deceased person). It also does not apply if probate or letters of administration have not been obtained.