‘Not their money’: ATO failing to pay tax returns owed to grieving widows
Grieving Australians are waiting years to be paid tax returns they’re owed with complaints to the ATO hitting a 10-year high.
Katey Macpherson was 37 weeks pregnant when she and her husband Chris Stoker sat in a doctor’s office in 2023 and were told he had been diagnosed with terminal cancer.
“It felt like someone pouring boiling water over your head and you think this can’t be my life,” she said. “Then we lost him when my little girl was eight months old.”
For the months that remained of Chris’s life, the couple balanced raising a newborn with the practicalities of preparing for a future without the other. But despite doing everything the system asked of them to ensure Chris’s family was left with what they were entitled to, Katey has spent almost two years battling the Australian Taxation Office over his final tax return.
They visited a lawyer to write a will and accessed his superannuation and life insurance. Despite his deteriorating health, Chris continued to work to help his young family financially while Katey was on maternity leave from her job.
“He’d often have to carry a vomit bag when we were doing walks with our daughter, he was a really determined person,” she said.
It’s these memories that keep Ms Macpherson from giving up on recovering his tax return that she estimates to be a few thousand dollars. However, the hours spent on the phone to the ATO – either on hold, or getting inconsistent information — has taken a toll on the grieving single mother.
A news.com.au investigation has found complaints to the ATO about deceased estates have more than doubled in the past year, with 584 complaints received - the highest number in a decade. More than 20 widows told news.com.au they have been traumatised and left behind by the process the ATO employs.
Do you know more? Contact mridula.amin@news.com.au
Fear they may be breaking laws
Experts said different requirements for death and finances across Australia’s states and territories jars with the legal framework that the ATO operates under. Only a person who has secured a grant of probate or letters of administration from a Supreme Court can legally access a deceased person’s tax information and assets.
“This becomes a problem when in some jurisdictions, such as in Queensland where you don’t need a grant of probate or letters of administration in quite a few matters,” said Ian Raspin, managing director of specialist estate taxation practice BNR Partners.
Probate is the legal process of proving a deceased person’s will is valid, and in Queensland where Ms Macpherson lives, the court filing fee is currently $819 and a lawyer can cost thousands.
“I think it’s ridiculous that I can transfer an $800,000 house without probate, but for a few thousand dollar tax return they demand it,” she said.
MORE: ‘Legit’ Aussie tax secrets revealed
What makes the situation even more frustrating for Ms Macpherson is that she can’t even find out the from the ATO the exact value of the tax return she’s fighting for.
Australia’s tax secrecy provisions impose strict obligations on the sharing of tax information. Tax officers who disclose protected information to an unauthorised entity, which can include the value of a tax return, can be jailed for two years.
An ATO spokesperson said situations would be assessed on a case-by-case basis and “who can access information or a refund the ATO may hold on behalf of the deceased person, depends on the circumstances of the individual”.
Mr Raspin said these restrictions mean taxation officers can be held back by the fear they may be breaking laws.
“That becomes part of the problem, and the ATO and Treasury are aware that this basically needs a legislative fix,” he said.
Returns confirmed then cancelled
The same information that a taxation officer can be jailed for two years for sharing, arrived in the form of a letter for Tammy Beath.
She and her husband David both worked as mine operators in regional Queensland prior to his sudden death from a heart attack in 2023.
After sending the ATO her late husband’s final tax return form she thought she’d done the right thing as the executor of his estate. Particularly when she received a confirmation from the ATO on 2 May this year that an amount of $7742 would be forwarded to the nominated financial institution.
The money never showed up.
“I’ve never received a phone call from the ATO to say it was cancelled. I rang them myself to see what the hold up was and was told I needed a probate letter,” she said.
Ms Beath is disappointed that the onus is on widows to call the ATO to find out if there’s an issue and feels the communication from the government department is misleading.
In August this year, she engaged a lawyer to write to the ATO to explain that probate should be waived given the tax return is the final remaining item of the estate.
She is still waiting to hear back and said it’s exhausting needing to navigate next steps alongside her own mental health grieving her husband.
“The next step would be making a formal complaint because something needs to be done about this,” she said.
A rising problem despite tax watchdog review
In 2020 the Tax Ombudsman investigated the issue and made several recommendations to the ATO to provide clearer guidelines in relation to deceased estates. The ATO’s response to the report included updating their website to outline a checklist on what to do when someone dies. It also included a commitment to “confirm its position as to how the tax law applies” in relation to disclosure of deceased person’s information without a grant of probate or letters of administration.
The Inspector-General of Taxation and Ombudsman Ruth Owen said the ATO has not changed its policy stance in the interpretation of secrecy laws.
“I think we did see some improvements for a while after my predecessor’s report, but clearly what we’re hearing is that it’s deteriorated again,” she said.
Ms Owen said she currently receives at least one to two complaints a week on the issue and confirmed they had also challenged cases successfully where the ATO had incorrectly requested probate where it was not needed.
“We see too many instances where the ATO advice is not correct about whether they need probate or not,” she said.
The Ombudsman said the ATO’s ambiguity leaves room for error and confusion.
“There’s no publicised threshold by which you say ‘at this level of tax assets then you will need to get probate’ so people are really unclear,” she added.
‘Why does it have to be so hard?’
For Monette Emery, 45, finally receiving money that was rightfully hers felt like getting away with something under the radar.
“I don’t like this element of, I got away with doing a naughty thing. But really, it shouldn’t be a naughty thing,” Ms Emery said.
Her husband Michael died in January 2023 from liver disease and had named her as executor in his will. To complete her responsibilities as executor of his estate, she contacted the ATO and was told she required probate. After some back and forth, an ATO officer suggested she find an empathetic tax accountant to assist her further.
Ms Emery was able to connect with an old family friend with a tax accountant, who checked her late husband’s documents and final will. When it came to the paperwork, it still felt like guesswork.
As neither had the official authorisation that the ATO required, they filled out the final tax return and decided to leave it unsigned.
“What he did was he filled everything out, and at the bottom, he put all of these details in case the tax officer wanted to contact him to discuss an unsigned tax return,” she recalled.
Around the same time she also wrote to her local federal MP Kara Cook who wrote back saying she had forwarded on Ms Emery’s case to the Treasurer.
Several people in Queensland and South Australia confirmed to news.com.au that only after complaining to their local MPs did they receive deceased estate tax returns the ATO had refused to release.
Three weeks later, the money arrived for Ms Emery.
“I was just really dogged and determined that I was going to find a way to fix it. But also there was an element of this is so hard. Why does it have to be so hard?”
Texting a dead man’s phone
Similarly, Lesley Fletcher, a Brisbane-based widow made a complaint to the ATO when her late husband’s final tax return was approved, then cancelled due to probate not being completed.
The ATO texted her late husband’s phone in March 2024 despite being aware he’d died more than a year prior.
“Hi Shane, we’re at the final stage of processing your tax return. We’ll deposit your refund within 3 business days to your nominated bank account,” it read.
“They know he’s dead and yet they’re still texting his phone,” Ms Fletcher said.
It was a shock as she had still been in the grip of grief after losing the love of her life suddenly on their 34th wedding anniversary. What added to her stress further was when she found out the ATO had cancelled the return without ever informing her when she inquired about the missing payment weeks later.
Only after her accountant lodged an official complaint with the ATO in July 2023 was the refund of $2900 released the next month, without requiring probate.
A solution required
In 2020, the Commissioner of Taxation used remedial powers to modify secrecy laws so tax agents, lawyers of an executor and administrator can access certain deceased tax information. The government later moved to amend the legislation to formally incorporate the modification into the Tax Administration Act 1953.
However tax agents have still reported issues in being able to assist clients properly, given the amendment does not waive a requirement for probate or letters of administration.
Last month, the accounting body CPA wrote to Tax Ombudsman Ruth Owen to lobby for a review of the ATO’s administration of deceased estates noting their members continue to face “significant delays, communication gaps, and administrative rigidity, particularly when probate is not required”.
CPA suggested clearer guidance and “a dedicated support channel for tax agents, would ease the compliance burden and provide much-needed compassion in sensitive circumstances”.
The Commissioner was asked to use remedial powers again to expand the definition of a “legal personal representative” (the person authorised to access tax information and assets) to assist in cases where it would be uneconomical to obtain a grant of probate. However, this proposal was rejected.
For many grieving family members left behind and the professionals trying to help them, it’s felt like another door closed that could help resolve the issue.
Focus on collection rather than returns
The ATO said earlier this year that the agency needed to focus on recouping the $50 billion debt balance.
Tax Ombudsman Ruth Owen acknowledged there is an important responsibility to collect tax that’s legally due but the ATO needs to be entrusted to return money owed too.
“They’ve also got a responsibility to return tax that is due to people where it’s actually valid, in particular for people who’ve lost loved ones,” she said.
Ms Macpherson has started thinking about letting the money go but believes her husband would have wanted that money to help his daughter go to her first swimming lessons, or prepare for school.
“That makes me angry that it’s sitting there because I know if it was the other way around and tax was owing, they’d be knocking on your doorstep trying to get it,” she said.
Originally published as ‘Not their money’: ATO failing to pay tax returns owed to grieving widows
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