ATO Interpretative Decision
ATO ID 2002/60
Income Tax
Deductibility of expenses incurred by administrator of a deceased estate prior to appointmentFOI status: may be released
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This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Can an administrator of a deceased estate claim pre-appointment expenses under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
No. An administrator of a deceased estate cannot claim pre-appointment expenses under section 8-1 of the ITAA 1997 as they were not incurred in gaining or producing assessable income.
Facts
The taxpayer was appointed the administrator of a deceased estate.
The taxpayer incurred expenses (e.g., travel expenses, legal fees, accommodation expenses, etc) prior to being appointed administrator.
The deceased estate did not reimburse the taxpayer for the expenses they incurred prior to their appointment as administrator.
The taxpayer paid expenses from a personal bank account.
Reasons for Decision
An administrator of an estate is a person authorised to administer the estate of a person who has died intestate.
Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature.
The courts have considered the meaning of 'incurred in gaining or producing assessable income'. In Ronpibon Tin NL Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; 56 ALR 785; 8 ATD 431 the High Court stated that:
'For expenditure to form an allowable deduction as an outgoing incurred in gaining or producing the assessable income it must be incidental and relevant to that end. The words "incurred in gaining or producing the assessable income" mean in the course of gaining or producing such income.'
The various expenses incurred by the taxpayer prior to being appointed an administrator were not incurred in the course of earning income. Accordingly, the expenses incurred prior to appointment as an administrator are not deductible under section 8-1 of the ITAA 1997.
Date of decision: 9 August 2001
Legislative References:
Income Tax Assessment Act 1997
section 8-1
Case References:
Ronpibon Tin NL Tong Kah Compound NL v. Federal Commissioner of Taxation
78 CLR 47
56 ALR 785
8 ATD 431
Keywords
Deduction and expenses
Legal expenses
Deceased estates
Administration expenses
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 9 August 2001 | Original statement |
| 27 June 2008 | Archived |