Updated October 2026
Probate Problem 50
Family businesses often represent years of work and provide income for several generations. When an owner dies, the family must manage both the estate and the practical demands of keeping the business operating. Employees still need wages, customers expect service and tax obligations continue.
Probate does not automatically stop a business trading. The effect depends on its structure, who has authority to make decisions and the succession arrangements already in place. Early legal and accounting advice can protect business value while the estate is administered and help avoid missed tax deadlines.
What becomes part of the estate
Probate is the Supreme Court's recognition of a will and the executor's authority to administer the estate. Where there is no valid will or an executor cannot act, letters of administration may be needed. Obtaining a grant is one stage of administration, rather than the completion of every estate task.
The business structure determines what the deceased owned. A sole trader personally owns the business assets and is responsible for its debts. In a company, the estate may hold the deceased's shares, while the company continues to own its premises, equipment and money. An executor cannot simply use company funds to pay estate liabilities.
For a partnership, death may dissolve the partnership, subject to its agreement. For a family trust, the deed and trustee arrangements determine control; trust assets do not automatically pass under a person's will. Review the constitution, shareholder agreements, partnership agreement and trust deed alongside the will.
Who can keep the business running
Surviving company directors can generally continue managing operations. A more urgent problem arises when the deceased was both the sole director and sole shareholder of a proprietary company. ASIC explains that the executor or administrator can appoint a replacement director under section 201F of the Corporations Act 2001.
The replacement may be the executor, administrator or another suitable person. Being a beneficiary does not automatically make someone a director. Until authority is established, banking, payroll and supplier payments may be disrupted. Check signing authorities and regulatory licences immediately, and identify which decisions require formal approval.
A real NSW case involving urgent business continuity
In Re Estate of the Late Tanju Andrew Assim (2015), a Sydney real estate agent died and no signed will could be located. He was the sole director and shareholder of three companies and the only signatory to his agency's trust account. Month-end payments to landlords were approaching, but nobody could authorise them.
His two daughters urgently applied to the NSW Supreme Court. The Court appointed them as administrators with limited powers, enabling director appointments and the preservation of the businesses pending a full grant. The orders allowed ordinary business operations to continue but did not confer unrestricted powers to sell assets or wind up the companies. The application's costs were payable from the estate.
The case demonstrates why business succession must address immediate signing authority as well as eventual inheritance. Urgent court relief can sometimes protect value, but the available orders depend on the evidence and the circumstances.
Valuation and cash flow during administration
A business valuation helps the executor assess the estate's interest and negotiate any sale or transfer. Relevant factors can include debts, profitability, goodwill and dependence on the deceased's skills or relationships. Property, shares and business assets may require different valuation methods and tax records.
The estate also needs cash for its own debts, expenses and tax obligations. Company cash is not automatically estate cash. Consider available distributions, insurance and any funded buy–sell agreement before assuming that a rushed business sale is necessary. Family disagreement about ownership or management can add costs and delay these decisions.
ABS figures released in August 2026 recorded 2,814,778 actively trading Australian businesses at 30 June 2026, including 848,300 sole proprietors. These are national business counts, not figures for family businesses or probate disputes. They illustrate why planning must accommodate different ownership structures.
The two year tax rules executors need to understand
Australia has no general inheritance or estate tax. However, estate income and asset disposals can create tax liabilities. There is no blanket rule that an estate is tax-free for two years, and the relevant deadlines generally run from death, not from the grant of probate.
For qualifying inherited homes, the ATO's main residence rules can allow a full capital gains tax exemption when the sale settles within two years of death. Signing a sale contract before the deadline is insufficient if settlement occurs afterwards. Eligibility depends on matters including the property's acquisition and use, and residency rules. This exemption does not generally cover a factory or business premises.
An extension of the two-year period may be available. The ATO has conditions for automatic relief and can consider discretionary requests. Waiting for a better market or unexplained inactivity can count against relief. Missing two years does not necessarily make the whole sale taxable; another exemption or a partial exemption may apply.
A separate rule matters directly to family businesses. Under section 152-80 of the Income Tax Assessment Act 1997, eligible inherited business assets may access small-business CGT concessions where the relevant CGT event occurs within two years of death and the deceased would have qualified immediately before death. Modified conditions apply, and the Commissioner can extend the period. After that period, eligibility may still exist under the ordinary rules. Have the accountant identify the relevant asset, event and deadline. A company-owned asset is not inherited merely because its shareholder dies.
Estate income tax and penalties are separate issues
The ATO's deceased-estate income-tax guidance provides concessional treatment for estate income assessed to the trustee in the first three income years, subject to applicable conditions. This includes the part-year after death and is not three full years from that date. Later rates differ, and this concessional period cannot be extended.
For example, a death on 15 June 2026 means the estate's first income year ends on 30 June 2026; the third ends on 30 June 2028. Required returns and payments still have deadlines. Tax penalties relate to separate compliance failures, and interest may apply to unpaid tax. Neither is automatically imposed merely because two years have passed.
Christine on the cost of allowing an estate to drift
I had a client whose estate matter slowed down and ran beyond two years after the death. The delay ended up costing the client additional tax and penalties. It was a reminder of how expensive unresolved administration can become.
My advice is to involve the accountant early and put the relevant dates in the diary. Families understandably focus on who gets what, but someone also needs to keep the administration moving. The two-year anniversary needs attention well before it arrives, with any extension considered on its merits. It is not a date to discover when the sale is finally ready.
Practical steps to protect the family business
1. Establish authority. Locate the will, identify the executor and check who can operate accounts, sign documents and make company decisions. Seek advice promptly if urgent appointments are needed.
2. Review ownership and agreements. Confirm which assets belong to the estate, company or trust. Check succession and buy–sell provisions before promising a beneficiary control or a particular asset.
3. Prepare a financial timetable. Obtain appropriate valuations, assess cash needs and have the accountant identify tax returns, payments and concession deadlines. Retain evidence explaining any unavoidable delay.
4. Agree on the longer-term plan. Consider continued trading, a family buyout or an orderly sale. Document decisions, manage conflicts of interest and keep beneficiaries informed.
Contact CM Lawyers for advice on probate, estate administration and business succession. A coordinated plan can protect day-to-day operations while the family works through ownership, tax and inheritance questions.
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