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Legal personal representatives of smaller estates can finalise matters sooner – PCG 2018/4

Legal personal representatives of smaller estates can finalise matters sooner – PCG 2018/4

An executor or administrator (legal personal representative) of an estate has many responsibilities and some of which include the following:
1. administer the estate according to law;
2. apply to the Court for a Grant of Probate or Letters of Administration to the Court;
3. distribute the estate of the deceased, subject to any administration

A practical compliance guideline (PCG 2018/4) was recently released by the Australian Taxation Office (ATO) in regard to the obligations of a legal personal representative and their ability to distribute a small estate within six (6) months of submitting a tax return on behalf of the deceased.

A legal personal representative must lodge a tax return on behalf of the deceased and the estate for the particular financial year. If the legal personal representative does not lodge a tax return on behalf of the deceased or if they lodge a return and receive a notice of assessment from the ATO and distribute the estate after having received the notice of assessment then the legal personal representative can be held personally liable. The Legal personal representative will only be personally liable and pay any outstanding debts on the value that the legal personal representative had control over.

The purpose of this guideline is to provide some security for legal personal representatives when distributing smaller estates. This guideline applies in the following circumstances, although should be noted does not apply when there is no grant of probate or letters of administration :

1. in the four years before the person’s death:

a. the deceased did not carry on a business;
b. the deceased was not assessable on a share of the net income of a discretionary trust;
c. the deceased was not a member of a self-managed superannuation fund; and

2. the estate assets consist only of
a. public company shares or other interests in widely-held entities;
b. death benefit superannuation;
c. Australian real property;
d. cash and personal assets such as cars and jewellery, and;
e. the total market value of the estate assets at the date of death was less than $5 million and none of the estate assets are intended to pass to a foreign resident, a tax exempt entity or a complying superannuation entity.

This means that if a Legal Personal Representative does not receive a notice of assessment from the ATO within six (6) months of having lodged the deceased’s tax return or receive a notice of review then the Legal Personal Representative may distribute the estate without being personally liable.

If you would like further information about this or any other estate administration matter, please contact us.

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