Review: In April 2024 the Australian Taxation Office (ATO) finalised its review of Practical Compliance Guideline (PCG) 2018/4, which addresses the liability of a Legal Personal Representative (LPR) for the outstanding tax-related liabilities of a deceased individual.

The Law Society of Tasmania’s Estate & Succession Law Committee made submissions to the ATO in November 2023 in association with the review.

Expanded Scope: One significant update from the draft is the expansion of the PCG’s scope. Now, it applies to estates with a total market value of less than $10 million at the date of death, up from the previous threshold of $5 million.  Given that the revised Guideline is retroactive, it is advisable to reassess whether LPR clients who were previously ineligible can now benefit from it.

Inclusion of Superannuation Benefits: Regarding the $10 million threshold, the ATO’s compendium of comments clarifies that this includes the value of superannuation death benefits paid to the estate, even though these were not assets at the time of death. The value at the date of death is used for this calculation.

Assets Passing to Tax-Exempt Entities:  Another beneficial change is that LPRs can now apply the PCG even if the assets are passed to a tax-exempt entity that is also a Deductible Gift Recipient (DGR). This adjustment provides more flexibility in managing the distribution of estate assets.

Practical Application: LPRs should review the updated PCG 2018/4 and the associated compendium of comments to fully understand the changes and their implications on the administration of estates.

For additional details, please refer to the full PCG 2018/4 and the compendium of comments.

Excluded:
It’s crucial to note that this Guideline does not cover the tax liabilities that an LPR might have for the deceased’s estate, that is, for the period after the individual’s death.

Additionally, the Guideline does not apply to LPRs who have not obtained probate or letters of administration, as such LPRs are not personally liable for the deceased’s taxes and therefore do not require the protections offered by the PCG.