Deceased Estate and land tax

I came across something that made me wonder if I have found a legal way to avoid land tax. A friend of mine asked my assistance to interpret her recently deceased mother?s will and a list of assets that an executor had sent her.

Her mother was a little bit recluse and estranged from the family, so they had no idea that she and her brother had not divided up my friends? grandmother?s deceased estate. She passed away over 30 years ago, but her estate was still untouched. The estate contains e.g. a small two bedroom house on a double block in an eastern suburb of Melbourne. The value of the land alone is about $1.5m. My friend?s mother also owned her unit that was her primary residence and her brother lived in the ?grandmother?s house? but he owns a house interstate as well. In this case who (if anyone) was/is liable to pay land tax for my friend?s grandmother?s house?

My friend is pretty sure that her mother or her uncle never paid a cent of land tax. They simply would not have had capacity to pay anything or even understand about the liability. She believes that only reason that they never divided estate up (did not even touch the bank accounts or term deposits) was that they simply would not have known what to do and it was all too hard. :confused:

The executor found many untouched bank accounts that government had cleaned up. However they can make a claim and government will pay the funds back to the estate.

Another question that came to my mind is how long legally you can have ?undivided deceased estate?? Is there any time limit? In my friend's case it looks like that her grandmother did not have a will.
 
This sounds like an unadministered estate. Upon death property of the deceased automatically vests with the state and then vests with the executor once probate is granted if there is a will. If there is no will then a family member can apply to administer the estate and if granted then estate twill then vest with the administer.

An executor has a duty to administer the estate quickly - generaly rule is 1 year. If no will then no one may apply to administer the estate and the relevant authorities may not know of the death.

Land tax would be liable unless there is an exemption. An exemption would exist for a main residence but once a person dies this exception would no longer apply. However a new exemption may apply for a short period while the estate is being administered.

In this case there is probably a large amount of land tax owing which will come to notice once hte property is transferred. The estate would be liable.

Who has been paying the rates all this time?
 
If there is no will then a family member can apply to administer the estate and if granted then estate twill then vest with the administer.

An executor has a duty to administer the estate quickly - generaly rule is 1 year. If no will then no one may apply to administer the estate and the relevant authorities may not know of the death.

Land tax would be liable unless there is an exemption. An exemption would exist for a main residence but once a person dies this exception would no longer apply. However a new exemption may apply for a short period while the estate is being administered.

In this case there is probably a large amount of land tax owing which will come to notice once hte property is transferred. The estate would be liable.

Who has been paying the rates all this time?

It looks like that no-one has applied and administered estate. It was probably too hard for my friends' mother and uncle to comprehend. It looks like that uncle has paid rates and water rates, though. He was occasionally using the cottage when visiting in Melbourne.
 
Its not uncommon for an estate to fail to register for land tax or that the deceased failed to register and the apparent liability is ascertained following death.

One of the common elements of doing tax work for deceased estates is how often I see a deceased estate with an apparent income tax issue that hasnt been addressed for years.

OSR don't attempt to seek unpaid land tax back more than 4 years and in many instances can show remarkable discretion when applying penalties etc. Prompt and proper disclosure may need to be made and they do consider each case on its own merits.

In this case the executors should seek legal advice. The lawyers would raise these issues with OSR to ensure that the transfer to beneficiaries can be made with minimal arrears, penalties etc if any. After all OSR must be satisfied the transfer is exempt as a consequence of death. So land tax and duty are all intertwined.
 
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