Don’t Forget to Declare Your Executor’s Commission!

It is important to be mindful that the ATO considers that executor’s commission is assessable income and may attract GST.

Assessable Income

The ATO recently released ATO ID 2014/44 which re-confirmed its position that executor’s commission is assessable income.

The Decision acknowledges that executor’s commission may not fall within the meaning of ordinary income as:

1. 1. it is not clear that the taxpayer could be said to have expected or relied upon the payment; and
2. 2. the payment does not have any element of recurrence or regularity.

However, the Decision takes the view that executor’s commission falls within statutory income which includes “allowances, gratuities, compensation, benefits, bonuses and premiums” provided to the taxpayer which relate to employment or services rendered.

COMMENT:

If an executor intends to claim a commission then there may be opportunities to try to structure the timing of those payments in a tax effective manner particularly if the amount claimed is significant.

GST

The ATO published an interesting ruling in 2012 which dealt with the question of whether GST was payable on executor’s commission (Private Ruling No. 1012201810746).

The relevant facts of the Ruling were that the executor was carrying on a farming business and was registered for GST.

Whilst the Ruling accepted that the activity of acting as executor was an isolated and one-off activity, it found that GST was payable because:

1. 1. there was a supply of executor services for consideration;
2. 2. the activity had the characteristics of a business deal and fell within the meaning of an “enterprise”;
3. 3. the supply of executor services was in the course or furtherance of that enterprise;
4. 4. the supply was connected with Australia;
5. 5. the executor was registered for GST;
6. 6. the supply was not GST-free or input taxed.

COMMENT:

The Ruling has important ramifications for all executors who intend to claim executor’s commission.

If the executor is not registered for GST, this will only be an issue if the $75,000 threshold is exceeded.

However, if the executor is registered for GST (even if in relation to a totally unrelated enterprise) then the executor will potentially be exposed to a GST liability on the commission.

If you require futher information please contact Leanne Matthewson, Alan Cumming or Katherine Marshall in our Wills, Estates and Superannuation team.

Prepared by Alan Cumming

This publication has been carefully prepared, but it has been written in general terms and should be viewed as broad guidance only. It does not purport to be comprehensive or to render advice. No one should rely on the information contained in this publication without first obtaining professional advice relevant to their own specific situation.