Dealing with deceased estate tax

Legal personal representative

An important part of administering a deceased estate is making sure that all tax obligations are complete before the final distribution of the estate assets is made to the beneficiaries.

If you're administrating a deceased estate, you are recognised as the legal personal representative. For tax purposes, this means you can:

• manage the deceased’s tax affairs
• have access to the deceased’s information and assets held by the Australian Taxation Office (ATO)
• appoint a registered tax agent.

It also means you’re responsible for:

• reviewing the deceased person’s history of tax compliance and lodging a final tax return if required
• lodging a trust tax return for the deceased estate if required
• providing for any tax liabilities of the estate before its assets are distributed to beneficiaries.

Date of death tax return

When a final tax return is lodged for the deceased person, it's called a date of death tax return.

The date of death tax return covers the period from 1 July of the income year in which the person died, up to the date of death. This is different to a trust tax return for the deceased estate, which is for the period after the person died.

In some case, the deceased may not have lodged their tax returns for many years before death. When this happens, you’re must review the deceased’s tax history up to the date of their death.

Further returns or actions may be required to finalise the deceased person’s tax affairs if:

• there were years where returns were not lodged
• information was not disclosed.

To complete these returns, then you’ll need to get the deceased person’s tax information.

Lodging ongoing tax returns for the deceased estate

As the legal personal representative you must hold the deceased estate assets until you can distribute them to the beneficiaries. During this time, the estate may receive income from these assets. For example, rental income from a property, or dividends from shares.

In this case, you need to lodge tax returns for the estate and pay any tax from the estate. The tax returns lodged for the deceased estate are trust tax returns.

The review and lodgement of trust tax returns for the estate must happen for:

• the rest of the income year in which the person died
• each year until the estate is finalised.

Managing business obligations for the estate

If the deceased person’s tax affairs included a business, there may be other obligations depending on the type of business.

It may include lodging a final business activity statement (BAS) for any outstanding tax periods.

Goods and services tax (GST) and capital gains tax (CGT) may apply to the sale of assets that the business used.

Finalising tax affairs

If you’re administering a deceased estate, you must complete all tax obligations before making a final distribution of the deceased’s assets. This includes paying any outstanding tax-related liabilities of a deceased person, up to the value of the deceased estate’s assets.

You may be required to meet those liabilities personally if the estate assets are distributed before complying with a notice of a claim (tax to be paid) by the Australian Taxation Office.

Tax information for a beneficiary of a deceased estate

There are no inheritance or estate taxes in Australia. However, as a beneficiary you may have tax obligations for the assets you inherit.

A deceased person’s estate may continue to earn income until it’s finalised. For example, the estate may have income from a rental property or other investments.

If you become entitled to income from the deceased estate, you must include it in your tax return. If this happens, the legal personal representative for the deceased estate will provide information to complete your tax return.

If you're a beneficiary who lives overseas, the legal personal representative is required to deduct withholding tax and pay your share of any capital gain on assets to the Australian Taxation Office (ATO). This must be done as part of any distribution of assets to you.