A Complete Guide to Zakat as a Testamentary Debt for Muslims Creating an Islamic Estate Plan

This article provides general information only and does not constitute legal or religious advice. Readers should seek tailored advice from a qualified New South Wales lawyer and their Imam or religious adviser before taking action.

Introduction

For many Muslims, Zakat is a fundamental pillar of their faith, representing a mandatory charitable donation intended to purify wealth and support those in need. Integrating this religious obligation into an Islamic estate plan is a common goal for those preparing their wills in Australia, ensuring their spiritual duties are fulfilled.

However, the legal standing of unpaid Zakat as an enforceable debt against a deceased estate in New South Wales (NSW) can be complex. This article explains how NSW law treats testamentary directions to pay Zakat, particularly following the 2024 Supreme Court decision in Re Estate of Ahmed Abou-Khalid [2024] NSWSC 253, to help individuals understand their liability and plan accordingly.

Interactive Tool: Check If Unpaid Zakat Is a Legal Debt for Your Estate

Understanding Zakat & Its Role in an Islamic Estate Plan for Muslims

What is Zakat & How Does it Apply to Muslims

Zakat, also known as almsgiving, is a mandatory charitable donation and one of the five fundamental pillars of Islam. Furthermore, it is an essential act of worship for every sane, adult Muslim whose wealth meets or exceeds a minimum threshold known as the Nisab.

The primary purposes of this obligatory practice include:

• Purifying wealth: It serves to purify a Muslim’s wealth and to assist the poor, the needy, and other eligible recipients.
• Encouraging circulation: It helps discourage the hoarding of wealth and encourages its circulation for the benefit of society.
• Preventing concentration: It ensures that wealth does not remain concentrated among a few individuals.

The Intersection of Islamic Principles & NSW Law

While Sharia principles guide the religious obligations of Zakat for Muslims, these principles operate within the framework of Australian law, which raises the question of are Islamic wills legally valid in Australia. In NSW, religious communities are viewed as voluntary associations, and their rules function as a “consensual compact” among members.

According to the judgment in Re Estate of Abou-Khalid, the relationship between Sharia and Australian law is as follows:

• Informing application: Sharia law may inform the application of Australian law.
• General law supremacy: It cannot override or operate outside of the general law.
• Enforceability requirements: Religious obligations, such as Zakat, are not automatically enforceable in NSW courts unless they are part of an agreement or commitment that is independently binding under the general law.

How to Calculate Your Zakat Liability & Tax Deductions in NSW

Understanding Nisab & How to Calculate Zakat

To calculate Zakat, you must first determine if your wealth meets the Nisab, which is the minimum threshold a Muslim must possess before the obligation to pay Zakat arises. The Nisab is based on the value of either gold or silver, and the specific thresholds are generally set at the equivalent of:

• 85 grams of gold; or
• 595 grams of silver.

The monetary value of the Nisab fluctuates with the market prices of gold and silver. For example, as of 13 March 2026, the silver Nisab was valued at $2,368.06, while the gold Nisab was $17,489.27. Furthermore, most scholars recommend using the silver standard to calculate your Zakat liability. This is because silver has a lower threshold, which allows for more wealth to be distributed to those in need.

Once your net assets have met or exceeded the Nisab for one full lunar year, the amount of Zakat to give is 2.5 percent. The calculation involves assessing your Zakatable assets (such as cash, savings, and business assets) and subtracting any deductible liabilities.

Tax Deductibility of Zakat Payments in Australia

When you give Zakat in Australia, your payments may be tax-deductible. However, this is conditional on the payment being made to a registered charitable organisation.

For instance, donations made to organisations like the National Zakat Foundation (NZF) are stated to be 100 percent tax-deductible. Therefore, when making your payment, it is important to ensure the recipient organisation has the appropriate legal status for donations to be claimed as a deduction on your tax return.

Is Unpaid Zakat a Legal Debt in NSW Probate for Australian Wills

Evaluating if Unpaid Zakat Constitutes a Legal Debt

In NSW, unpaid Zakat is generally treated as a voluntary religious obligation rather than a legally enforceable debt against a deceased estate, a key consideration in matters of Islamic probate. For Zakat to be considered a binding liability, the deceased must have entered into a specific agreement or promise during their lifetime that is enforceable under general Australian law. Ultimately, a simple expression of religious duty is not sufficient to create a legal debt.

The case of Re Estate of Abou-Khalid established that an obligation of conscience does not automatically become legally binding on an estate. At the time of his death, Mr. Abou-Khalid had no known enforceable obligation to pay Zakat, and there was no evidence of an unfulfilled commitment or unsatisfied debt. As a result, the court determined that a “religious liability in the nature of a debt” could not arise from what was a voluntary act of conscience during the person’s life, as stated in paragraph 60 of the judgment.

Priority of Debts Including Funeral Expenses & Zakat

Wills in NSW often contain directions for the executor to pay various expenses from the estate. A common clause may instruct the trustee to pay:

• debts;
• funeral and testamentary expenses; and
• Zakat payments.

For example, in Re Estate of Abou-Khalid, clause 4(b)(i) of the will grouped “Zakat payments” with legally recognised obligations like debts and funeral costs.

Despite being listed together, Zakat does not hold the same legal priority as standard debts. Instead, the following obligations must be paid before any distributions are made to beneficiaries:

• funeral and testamentary expenses; and
• legally enforceable debts.

Therefore, a direction in a will to pay Zakat is secondary. Furthermore, it may not be enforceable if it is considered uncertain, which can be grounds for challenging an Islamic will in NSW, especially if no pre-existing legal liability was established by the deceased.

Analysing Re Estate of Abou-Khalid 2024 NSWSC 253 & NSW Law

The Facts of the Primary Case Law

The case of Re Estate of Abou-Khalid involved the will of Mr. Ahmed Abou-Khalid, who passed away on 9 December 2019. His will, dated 4 March 2013, was prepared to align with certain Sharia principles, including a provision that a son’s share of the inheritance should be double that of a daughter. In addition, the will contained a direction for his trustee to pay his “debts, funeral and testamentary expenses, death, estate duties and Zakat payments” from his estate.

A key issue arose because, at the time of his death, Mr. Abou-Khalid had no known legally enforceable obligation to pay Zakat. Specifically, there was no evidence of:

• any demand for payment;
• an unfulfilled promise; or
• an existing debt related to Zakat.

As a result, the administrator of the estate sought judicial advice from the NSW Supreme Court on whether they would be justified in distributing the estate without making any Zakat payments as directed by the will.

The Supreme Court Decision on Testamentary Zakat

The Supreme Court of NSW found that the administrator was justified in distributing the estate without paying Zakat. The court determined that the direction in the will to “pay … Zakat payments” was void for uncertainty, as it was not supported by a pre-existing liability that was enforceable at law or in equity which Mr. Abou-Khalid had accrued during his lifetime.

According to the judgment in Re Estate of Abou-Khalid, the court’s reasoning highlighted several key principles:

• an obligation of conscience, such as the religious duty to pay Zakat, does not automatically create a legally binding debt on a deceased person’s estate;
• without an underlying legal liability, the direction would confer an unconstrained power on the executor to make payments of an unspecified nature to unidentified parties, rendering it inoperable; and
• for such a direction to be valid, the deceased must have bound themselves to the payment during their life through an agreement or commitment enforceable under general Australian law.

Executor Liability & Managing Zakat in Australian Wills

Executor Liability for Unpaid Zakat

Executors of Australian wills that include directions for Zakat payments face potential liability if they distribute estate funds improperly. The direction to pay Zakat creates uncertainty when it is not linked to a legally enforceable debt. As a result, an executor who pays Zakat from an estate without a clear legal basis could be challenged by beneficiaries for misapplying funds.

In Re Estate of Abou-Khalid, the administrator sought judicial advice under Section 63 of the Trustee Act 1925 (NSW). This legal step was taken to determine if they would be justified in distributing the estate without making any Zakat payments. Ultimately, the court’s guidance protected the administrator from liability, highlighting that seeking judicial advice is a critical step for executors and underscores the importance of carefully appointing an executor for your Islamic will from the outset.

Drafting Clear Zakat Provisions to Protect Executors

To ensure an individual’s intention to pay Zakat is legally operable and to protect the executor, provisions in a will must be drafted with clarity. A simple direction to “pay Zakat payments” may be void for uncertainty, as it can be seen as giving the executor an unconstrained power to make payments of an unspecified nature.

To create an enforceable provision, a person should establish a binding commitment during their lifetime that is recognised under general Australian law, which could involve:

• creating a formal agreement or promise to a specific entity for a determined amount; and
• directing the executor within the will to satisfy this pre-existing, legally enforceable debt.

Furthermore, as stated in Re Estate of Abou-Khalid, the direction could be valid if it acknowledges that at the time of death, the deceased had bound their estate to pay a debt in the nature of a Zakat payment.

Conclusion

Integrating Zakat into an Islamic estate plan requires understanding its status as a religious duty and its complex treatment under NSW law as a testamentary debt. The case of Re Estate of Abou-Khalid underscores that for a Zakat payment to be an enforceable debt against an estate, a legally binding commitment must have been established during the individual’s lifetime.

To navigate the legal requirements of Australian wills while honouring your faith, seeking specialised legal support is essential for creating a valid Islamic estate plan. Contact LawBridge’s experienced Islamic wills and estate lawyers for tailored advice to ensure your will is clearly drafted and legally sound. This article provides general information only and is not intended as legal or religious advice.

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