Warwick Gilbertson: As an executor you have tax responsibilities.

I’m Warwick Gilbertson, one of the Partners at Turnbull Hill Lawyers. Today I’d like to talk to you about the responsibilities of an executor in regard to the taxation affairs of their deceased person.

When you’re asked to be an executor, do you know all the ins and outs of the financial affairs of the person who is asking you? If you’re like most of us, no you don’t. You don’t really know what you’re taking on.

It’s important that you understand not only are you taking on the responsibility of fulfilling that person’s wishes as they set out in the will, you also have the responsibility to finalise their financial affairs. Part of that finalisation is concluding their obligations with the Australian Taxation Office. When you become an executor, you take on that deceased person’s taxation obligations. You are obliged to make sure that their final tax returns are lodged. You are obliged to complete their returns in regard to the estate. If you’re managing the estate and it continues for a period of time, there will be tax returns completed by the estate. If you don’t do that and if you do not attend to the payment of that tax when you’re finalising the affairs of your friend or family member, you will bear that responsibility. When the taxation office comes asking why hasn’t it been done, you are the person they’re going to ask what have you done and they’re going to seek to ensure that not only do you finalise those returns, but you ensure that any tax outstanding has been paid.

What do you need to do to protect yourself?

Primarily, the first thing you should do is make inquiries to locate the last tax return that was lodged by the person who has appointed you as an executor. That will open the door for information, it will give you their tax file number, it will enable you to know, when did they last do it? Was it 10 years ago? Or have they returns that they need to lodge now? Are they company directors? Do they have a trust? What is your obligation? Having done that, the next thing you should do is speak to the person who looks after their tax affairs. Seek to speak to the accountant or the tax agent who has been representing them so that you know where are they at in regard to providing information. If no such person exists and you do not know, at the very least what you should do is you should notify the taxation office that the person who has appointed you as an executor has passed away. There is a specific form that you use in this instance. It’s logically called notice of deceased person.

When you lodge that form with the Australian Taxation Office, it means that they will then know that the person has died and it will set out a time limit from when they can seek to come back to you and to the estate of that deceased person in regard to their taxation affairs. It also means that your ability to obtain information will also change. We all know we live in a day of modern dysfunction in the sense of online services are taking over. In the Australian Taxation Office, they now have an online portal for lodging tax returns. When you file that notice of deceased person then the only person at this stage who the taxation office will deal with is the person who is appointed an executor under that person’s will. Their current tax agent will lose the ability to be able to go online to find out their affairs. That is why I said to you, firstly, get the tax return. Secondly, speak to the accountant. Only after then, lodge the notice of deceased person because that will compromise the tax agent’s ability to assist you.

Having done all of those things, you need to ensure that the tax returns are filed, the tax paid, and you need to seek advice in regard to that obligation. If you become aware that your deceased friend has not filed returns when they should or has filed returns where they omitted income, then you bear the responsibility for fixing that. As an executor, you take on serious responsibilities which have personal consequences. Yes, you have the consequences of ensuring the wishes of your friend are adhered to as set out in the will, but just as important is the responsibility you take on to finalise the taxation affairs of your deceased friend.

If you are in any doubt as to what your obligations are, seek advice. Contact us at Turnbull Hill Lawyers. We deal with these issues daily. We can assist you and clarify things for you, and protect you as an executor. Thank you.

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