Death and taxes: ATO improvements coming soon?

They say only two things are certain in life, death and taxes, and when these two certainties collide, it necessarily causes stress and difficulty. This undoubtedly rings true for those left behind to deal with the estates of loved ones who have passed away, perhaps unexpectedly, alongside dealing with the red-tape at the ATO. That is why the IGTO has recently completed a report on deaths and taxes which seeks to improve the experience of taxpayers and identify opportunities to improve tax administration in the area of deceased estates.

In a bid to improve the experience of taxpayers when dealing with the ATO in relation to deceased estates, the Inspector General of Taxation and Taxation Ombudsman (IGTO) has recently completed a report which identified opportunities to improve tax administration and cut unnecessary tax compliance.

“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…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.” – Karen Payne, IGTO.

The report covers some 130 complaints made to the IGTO regarding the ATO administration of deceased estates starting from 1 May 2015. The complaints raised 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 TFN 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.

As the complaints reveal, it can be very difficult of non-tax/legal experts to navigate the ATO system on behalf of the deceased taxpayer and understand their obligations. Multiple notifications of death are also currently required across Federal, State/Territory, local governments, and various other business and community organisations.

The report made recommendations which the ATO agreed with either in full, in part or in principle, including the following:

  • review, refresh and consolidate advice and guidance for deceased taxpayers, including binding guidance for lodgement of returns and TFNs;

  • better integrate ATO notification with existing end of life processes (ie with State authorities such as Births, Deaths, and Marriages);

  • allow digital notification of death including by registered tax practitioners;

  • promote digital deceased estate TFN application or easier application processes (ie through Tax Agents Online, ATO website and/or MyGov);

  • simplify tax filing requirements for a deceased taxpayer especially for simple estates;

  • confirm ATO position on which “representatives” can represent the deceased for tax purposes;

  • provide authorised tax practitioners with correspondence sent to deceased taxpayer’s MyGov; and

  • develop escalation channels to dedicated areas within the ATO for specialist advice on deceased estates.

While the IGTO helpfully points out that the ATO has recently made tax administration improvements to assist representatives of deceased individuals and their estates including the development of a deceased estate data package. There is still gaps in information and administrative processes, particularly around when there is a requirement to obtain probate and letters of administration.

What’s next?

If you’ve recently lost a loved one, we can help you through this difficult and traumatic time by taking care of all the tax-related matters of the estate and advise you on other matters should you require it. Improvements may be coming but it might take a while, and in the meantime, we can help you through the processes.

Jenni Anderson