Private ruling: Deduction claimable against an executor's commission
Published: October 2015
Ruling period: Year ended 30 June 2014 | Year ended 30 June 2015
Date scheme commenced: The scheme has commenced

Ruling: Q1: Is the executor of a deceased estate, who is awarded a commission to administer the estate, entitled to a deduction for the cost of maintaining a pet that belonged to the deceased? | A1: No

Relevant facts and circumstances: You were appointed as the executor of your partner's estate under their will. The copy of the will you have provided confirms that you are the sole executrix and trustee of the estate. As trustee, you were directed to sell your partner's home for the benefit of the beneficiaries. The will goes on to provide that you were to receive the contents of their house and the balance held in nominated bank accounts. The residue of the estate, after the payment of any debts, funeral and testamentary expenses, was to be divided between other beneficiaries. It is noted that the will makes no mention of any care being provided for their pet. You state that your partner had asked you to care for their pet and that it was your intention to ask them for some money to enable you to fund the care you would provide. However they died before this matter progressed any further and the situation remained unchanged in that the care of the pet was not provided for in their will. You then wrote to the other beneficiaries seeking their approval for you to claim an executor's commission in terms of section 68 of the Succession Act 1981 (Qld ). Your claim for X% commission on the value of the estate was based on your stated work in connection with the winding up of the estate involving: • Lodging and caring for the pet; • Securing the estate assets; • Arranging the funeral and headstone; • Attending to probate and instruction of lawyers; • Packing the home contents of the deceased, removing furniture and household goods; • Arranging disposal of rubbish • Preparing the home for sale including renovation work, cleaning and rubbish disposal; • The disposal of hazardous chemicals; • Arranging and packing items gifted to charities; • Maintaining the home in good condition; • Disposal of the deceased's motor vehicle; • Contacting overseas relatives to inform them of the deceased's death and estate issues; • Dealing with the deceased's grandchild regarding their needs as a beneficiary; • Negotiating with numerous service providers to the estate; • Dealing with and instructing lawyers and accountants to the estate; and • General estate matters. You received the executor's commission during the relevant income year.

Relevant legislative provisions: Income Tax Assessment Act 1997 - Section 8-1 | Succession Act 1981 (Qld) - Section 68

Reasons for decision: Summary: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) permits a deduction, where the taxpayer is not engaged in carrying on a business, for expenditure incurred in deriving assessable income so long as that expenditure is not of a capital, private or domestic nature. Accordingly, the expenses incurred by the executor of a deceased estate in earning a commission for the administration of the deceased estate would be deductible against the commission received so long as the particular expenditure was not capital, private or domestic in nature. In your case you have received an executor's commission equal to X% of the capital value of the estate in lieu of the normal or base commission which is set at 2.5% of the capital value of the estate. The additional commission awarded to you was based on the amount of work performed by you as executor of the estate as set out in your claim for commission which was made under section 68 of the Succession Act 1981 (Qld). It can be seen from the list of duties included in the claim that you submitted, that caring for the deceased's pet was one of seventeen specific duties you performed in relation to the estate which you considered to be relevant to your claim for the higher commission. Since your claim for the increased commission does not appear to have been disputed or amended in any way, we conclude that you were awarded the additional commission based on the totality of the duties set out in your claim. In this light it is apparent that the provision of care to the pet is only one of the seventeen items specifically set out in your claim for an increased commission and as a result it cannot be shown that the increase awarded is wholly attributable to the care of the pet. The will prepared by the deceased makes no mention of any requirement for the executor or any other person to provide care for the pet. You have, in a sense, adopted the pet and been awarded an executor's commission equal to X% of the value of the estate as recompense for all of the tasks undertaken as the executor. The costs incurred by way of maintaining the pet are considered to be a private expense that you have taken on and are thus not deductible against the executor's commission you received.