He said these include reimbursement only where all costs incurred by the executor such as engaging professional advisers are reimbursed to the executor, payment according to services performed which is often calculated by reference to the number of hours spent multiplied by an appropriate hourly rate, and commission.

“The rules in relation to executor's commission are relatively complex, largely based on case law that in some instances are hundreds of years old,” he said. “Importantly, however, from a tax perspective, the ATO has confirmed that the payment of commission is essentially a reward for services rendered. “

The ATO sets out the guidelines for payment to an executor in ATO ID2014/44.

The regulator states that the payment of Executor’s Commission to non-professional executors is “payment included within section 15-2(1) of the Income Tax Assessment Act 1997 (Commonwealth) as it is a benefit provided for the services rendered by the executor of the estate.”

It continues that other characteristics of income that have evolved from case law include receipts that:

• Are earned
• Are expected
• Are relied upon
• Have an element of periodicity, recurrence or regularity.

The taxpayer may be said to have earned the Executor's Commission as it related directly to the services they performed. It is not clear, however, that the taxpayer could be said to have expected or relied upon the payment nor has the payment any element of recurrence or regularity.

“In these circumstances, it is arguable whether the payment is income according to ordinary concepts and assessable under section 6-5 of the ITAA 1997,” the ATO states.

“It follows that commission paid to a non-professional executor for services rendered by them as an executor is included in the executor’s assessable income under section 6-10 of the Act, as the commission is assessable income of the taxpayer.”

Usually, the person appointed as executor is a family member and often also a beneficiary of the estate and will take on the role without seeking any payment for their time and effort.

It is best practice to discuss whether an executor wants to receive payment for their services when preparing a will, especially if the will-maker wants to appoint a professional executor.
There is no requirement to provide payment to an executor under a will, and they also don’t have an automatic entitlement to be paid.

“Partly to counteract this outcome, and to provide a level of certainty as to the overall quantum of payment that is ultimately received by an executor, some will makers simply provide a specific cash gift to their executors under their will,” Mr Burgess said.