Yes, the costs incurred by the legal personal representative (LPR) that relate to the deceased’s tax arrangements prior to death are deductible. The deduction can be claimed in the deceased’s tax return to date of death.
Under section 25-5 of the Income Tax Assessment Act 1997, there is the general rule that a taxpayer can deduct tax related expenses, including expenditure to a recognised tax adviser, for managing their tax affairs.
This said however, the general rule is that an allowable deduction arises, and may only be claimed, in the year that the expense is incurred.
In relation to a deceased estate therefore, there is a risk that costs incurred by the LPR in relation to the period before the passing of the deceased would not be deductible.
This potential loss of a deduction is saved by section 25-5(8) that specifically confirms that costs incurred by the LPR for tax advice relating to the period prior to the deceased's death can be claimed in the deceased’s final tax return.
In order to be deductible however, the expenditure must be such that if the deceased had incurred it prior to death, it would have been deductible.