Division 7A liabilities after death

This article explores the interaction between deceased estates and Div 7A, highlighting the obligations of executors, ATO views, and practical strategies to mitigate risk.

Executors of deceased estates1 have important income tax obligations, particularly following the grant of probate of the deceased’s will. If an executor does not act carefully, they may have to use personal assets to satisfy the outstanding tax-related liabilities of the deceased.

Executors should therefore be conscious of Div 7A ITAA36, because Div 7A can treat loans and forgiven debts from a private company to a shareholder (or an associate of a shareholder) as an unfranked dividend.

The death of the shareholder (or associate) does not extinguish Div 7A liabilities, and the actions of the executor can also trigger Div 7A liabilities to the deceased estate.

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