Proctor : November 2018
18 PROCTOR | November 2018 THE TIP OF A TAXATION ICEBERG? The potential liability of a legal personal representative A person’s appointment as a legal personal representative (LPR) is often perceived as a privileged role whereby a family friend or trusted adviser ensures that the deceased’s wishes are given effect. However, this fiduciary role also carries with it an array of responsibilities which should be considered before any appointment as an executor or administrator is accepted. An LPR is personally liable for all liabilities incurred in the estate’s administration. The LPR has a right of indemnity against the assets of the estate, but if they fail to pay a liability before distributing the estate, the LPR will be personally liable. Further, an LPR inherits the liabilities which were owing by the deceased at the date of death. This liability is, however, limited to the value of the assets of the estate. This includes the deceased’s outstanding tax liabilities and any tax payable following the issue of amended assessments that may be issued to the LPR in respect of the deceased’s prior year assessments. When probate or letters of administration are obtained, and the estate has been distributed prior to the payment of tax liabilities, the Commissioner of Taxation will pursue the LPR. Alternatively, when probate or letters of administration are not granted, the commissioner may determine the deceased’s outstanding tax-related liabilities and authorise a member of the Australian Federal Police (or state police) to recover such an amount from the deceased’s property. Essentially, there are three time periods in which the Australian Taxation Office (ATO) may issue a notice of amended assessment in respect of a deceased individual.