Can I deduct fees for managing tax affairs of deceased?

...yes, relevant fees incurred by a legal personal representative (LPR) that relate to the deceased’s tax affairs (rather than those of their estate), are deductible in the deceased’s date of death income tax return.

Current at 1 November 2021

Can I deduct fees for managing tax affairs of deceased?

...yes, relevant fees incurred by a legal personal representative (LPR) that relate to the deceased’s tax affairs (rather than those of their estate), are deductible in the deceased’s date of death income tax return.

Current at 1 November 2021

….more detail – The law allows taxpayers to deduct certain tax related expenses (section 25-5 of the ITAA 1997). This includes non-capital expenditure paid to a recognised tax advisor for managing their tax affairs and certain interest charges imposed by the ATO.

Generally, a deduction arises in the year that the expense is incurred. Without a special rule, expenses that an LPR incurs in relation to the deceased’s tax affairs prior to death would be incurred too late to be deductible. However there is a rule that enables the LPR to claim a deduction in the deceased’s final return for an amount that the deceased could have deducted if they had incurred the expense prior to death (subsection 25-5(8) of the ITAA1997).

Example – Pedro died on 1 May 2019. His daughter Gabriela was appointed as his executor. She obtained Probate of Pedro’s Will on 31 July 2019. In the course of the administration she determined that Pedro’s income had been understated. She engaged the services of a registered tax agent to provide advice about her liability as LPR in respect of Pedro’s affairs.
 
The tax advisor made various enquiries about the omitted income and it was ultimately agreed that the tax advisor would make a voluntary disclosure to the ATO in order to obtain certainty about Gabriella’s position. Gabriella incurred fees of $7,500 in managing Pedro’s tax affairs. The $7,500 was able to be deducted in Pedro’s final income tax return.

 
 

Feel free to contact our team should you want to discuss this topic further and potentially have clients who may be in this situation.

 

 

This publication is not intended to be and should not be used as a substitute for taking taxation advice in any specific situation. The information in this publication may be subject to change as taxation, superannuation and related laws and practices alter frequently and without warning.  Neither BNR Partners Pty Ltd, our employees or agents are responsible for any errors or omissions or any actions taken or not taken on the basis of this publication.