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The Tax Office has left issues dating back to 2011 unaddressed, the Tax Institute says.
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ATO’s outdated estate rules cause delays, confusion
27 June 2024
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The ATO’s administration of deceased estates needs an overhaul, practitioners say, citing delayed response times, inefficient paper communication and lack of clear guidance.
The Tax Institute said in a submission to the ATO this week that legal personal representatives (LPRs), and lawyers, tax agents and estate administrators, were struggling with the outdated system.
“There are several aspects of the ATO’s administrative approach that would benefit from amendment, clarification, or further consultation,” the submission, backed by the Society of Trust and Estate Practitioners Australia Limited (STEP), said.
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It called for a new, dedicated portal to house documents and replace outdated paper communications, with the notification process for a deceased person and obtaining an estate tax file number (TFN) a major contributor to delays.
Notification of a deceased person needed to be in writing and required the attachment of certified copies of the death certificate, will and probate.
However, practitioners reported the ATO often failed to receive the notifications, leading to additional effort and time spent and also raising concerns about the security of personal information.
“Feedback from our members indicates that paper communication is slow, and mail routinely gets delayed or misplaced,” it said.
“This is a security risk for the LPR and can often lead to delayed processing times. Some members have reported turnaround times taking up to four months instead of 28 days.”
The ATO’s apparent change in approach to voluntary disclosures also caused delays.
Practitioners reported that voluntary disclosures, which previously ensured accurate tax returns for deceased estates where there was no one able to attest to its completeness, were no longer available, leading to delays in administration, threats to executors and diminished estates due to advice and legal fees.
“We consider that it is important to ensure that the ATO effectively communicates its current, and any changes to its, administrative approach regarding the voluntary disclosure process,” the submission said.
“If there has not been a change in approach, we consider that the ATO should ensure that estate administrators have a clear pathway to have these issues resolved.”
Private binding rulings (PBR) were another point of contention, with turnaround times being “much longer” than the ATO’s time frames and contradictory approaches between PBRs confusing.
“Members have reported timeframes up to approximately six weeks (rather than 14 days) for an ATO Officer to make initial contact; and the entire ruling process, from application to outcome, generally taking approximately three to four months for what is perceived to be a simple matter, with complex matters often taking more than 12 months.”
The submission suggested the ATO prioritise providing “widely needed advice on a one-to-many basis” to reduce the pressure on staff responding to PBR requests, including on issues such as “double death” scenarios, appropriate tax treatment for assets paid for by beneficiaries, capital gains and losses, and family trust elections involving testamentary trusts.
Practitioners also reported a “perceived growing unwillingness on behalf of the ATO to settle matters and issue default assessments confusion in the market and a lack of confidence with the ATO’s early engagement processes.
The problems were exacerbated by a lack of clarity over the appropriate ATO contact to raise estate administration issues, with no appropriate forum to raise concerns. As a result, matters raised in Treasury discussion papers dating back to 2011 and the Inspector General of Taxation and Taxation Ombudsman’s 2020 report on the ATO’s handling of deceased estates still were left outstanding and unaddressed, it said.
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