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.
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.