An individual tax return reports income earned while a person was alive, while a deceased estate tax return, also known as a “date of death tax return”, reports income the estate earns after death (e.g., rental income or investment earnings).
Yes, an estate needs to obtain a TFN if the estate generates income after death.
Some of the common forms required by a deceased estate include the date of death tax return (if required) and the trust tax return for the deceased estate.
To determine any outstanding tax liabilities you can start by reviewing the deceased’s papers and personal records to find financial records, and any past returns.
As tax agents we can access the tax agent portal which will show us any tax debts owed by the deceased at the time of passing. Please contact us if you require our assistance in this regard.
Yes, it is possible for you to attend to all outstanding estate tax matters yourself, please note that tax matters for deceased estates can be complex, and professional assistance from First Estate Accounting will ensure legal compliance and accuracy. If you are an estate executor, you can be held personally liable if you have distributed the estate and it turns out that the estate has further tax liabilities.
The process for lodging a final tax return is similar to lodging a personal tax return. It’s necessary to gather records of income and expenses for the year of death, calculate any tax payable or refunds due, and lodge the return with the ATO. This return will show the income earned from 1 July up to the date of death.
A trust tax return will need to be lodged whereby Income earned after death must be reported. As tax agents, we are able to download details of investment income and salary earned prior to the passing to assist with this. One key difference is that a TFN for the estate will also need to be acquired.
Tax will be calculated on any income the estate generates (for example dividends, or rental income), as well as any growth in capital value if any of the estate assets are sold. The calculation will also depend on when the deceased purchased the assets, and specifically whether this purchase was before or after the introduction of capital gains tax (20 September 1985).
The executor or administrator will need to attend to finalizing all outstanding estate tax obligations prior to the distribution of the estate to the beneficiaries, including to the residuary beneficiaries. The beneficiaries themselves will not be taxed on the gifts they receive under a will. An exception may include nominal stamp duty paid on receipt of real property in some cases.
If you are entitled to income generated by an estate, you will need to declare it on your tax return. However, you receive a capital gift or share of the estate, you will not need to declare it on your return.
Yes, we can assist you in reconstructing the financial situations and resolving your outstanding estate tax obligations.
Prior to the distribution of the estate, you will need to make sure that all outstanding tax liabilities have been met. We can help you determine what these obligations and liabilities are given the circumstances of the estate. If shares are held by the estate, we can also assist you in pursuing a refund of franking credits.
If the Estate distributes assets such as shares or a property to the beneficiaries then there will also be Capital Gains Tax implications for the beneficiaries when those assets are sold in the future. First Estate can assist you with compiling the necessary information for your CGT records.
You will need to immediately notify Centrelink or the relevant government body of their passing. These payments may also need to be reported in the final estate tax return or assessed for any outstanding debts. Even if they are tax-free, a non-lodgement advice must be lodged.
As the deceased estate is treated as a separate taxpayer, and for this reason one of the reasons the Estate require its own Tax File Number, it cannot inherit the deceased's unused tax losses. Tax losses can be utilised in the final Date of Death tax return though. This is a complex area, and we recommend that you contact us to determine whether any tax losses may be carried over in your situation.
No, you will not be liable to pay CGT when you inherit a property as a beneficiary. However, you may face CGT when you eventually sell the property in the future.
The will depend on whether the property was purchased by the deceased before or after CGT was introduced (20 September 1985.)
If the property was purchased before this date, the cost base is the market value of the property at the date of death. If the property was purchased after this date, you will inherit the deceased’s cost base - i.e. what they paid for it. The exception to this is if the property was a primary residence, in which case you inherit the market value at the date of death - even if the property was purchased post 1985.
Yes, exemptions may apply to the sale of the deceased’s family home if the property is sold and settled within 2 years from the date of passing.
A trust return for the estate must be reported and that is where the details of the sale must be reported, detailing the capital gain or loss.
Generally, death benefits payments made to dependents are tax-free, but payments to non-dependents such as adult children can be taxable. The Superannuation Industry (Supervision) Act 1993 would determine dependency.
This depends on whether the trustee for the fund makes a determination to pay the proceeds to the estate or to a particular beneficiary. In some states, like New South Wales, the Supreme Court has the power to ‘claw back’ death benefit distributions to the estate to satisfy successful legal claims, such as family provision orders.
If a policy is held by the estate and generates earnings, tax may be payable. In other cases, life insurance payouts are generally tax free.
As a tax resident of Australia you are taxed on your worldwide income. As such foreign income or gains may be subject to Australian tax.
No, funeral expenses and probate fees are not tax-deductible. However, other administrative costs of the estate may reduce taxable income.
The "Notification of a Deceased Person" form needs to be completed and provided to the ATO along with a copy of the death certificate. The Grant of Probate, Grant of Letters of Administration or a Reseal must be provided to the ATO for any tax information to be released to you.
Best practice in estate administration is for the estate Legal Personal Representative to obtain an ATO clearance certificate prior to the distribution of the estate. This document confirms that no tax liabilities are outstanding, thereby allowing an executor or administrator to distribute the estate.
The unpaid tax amount and length of the delay will determine the interest and penalties payable to the ATO.
If there are discrepancies in your filing, or complex estate tax issues, your estate is more likely to be audited. Hiring a professional tax agent, like First Estate Accounting, will help reduce the risk of an audit.
You may be held personally liable as an executor if you have distributed the estate to the beneficiaries without first investigating the estate’s tax obligations, attending to those obligations, advertising the relevant notice of your intention to distribute the estate, and waiting for the relevant notice period to lapse before the distribution.
See answer above. Administrators who have obtained Letters of Administration share the same obligations to attend to estate tax obligations as executors who have obtained the Grant of Probate.
Executors are liable for their actions in attending to the administration of the estate, including in relation to tax matters. Best practice would be to obtain formal advice from an accountant, such as First Estate Accounting, which the executors can rely upon to explain or justify their actions.
Yes, the domicile of the deceased is a relevant consideration in determining estate tax obligations. Please contact us so that we can help you navigate these international tax considerations.
The tax treatment of estates where the deceased left a will versus estates where the deceased died intestate is generally similar, however, given that wills may be drafted in a myriad of different ways, certain wills can cause complexities when it comes to determination of tax obligations, including stamp duty.
Make sure that you engage First Estate Accounting at an early stage in the estate’s administration. Tax professionals such as ourselves, can point you in the right direction early on, ensuring that the matter is finalised as quickly as possible.
It’s necessary to report company and/or trust income separately. Please get in touch and we can guide you on the necessary steps.
Yes, similar to stocks, cryptocurrency holdings are subject to capital gains tax and need to be accounted for in estate tax finalisations.
Depending on the type of debt, debts or liabilities may reduce the overall estate taxable income. Please enquiry so that we may consider your individual circumstances.
The final individual tax return of the deceased may claim a tax deduction for these donations.
Yes, business owners and primary producers may be eligible for unique tax concessions. We can help you determine your entitlements.
The complexity of the matter will determine the turnaround time, however, if the return is lodged electronically, it is generally 5-10 business days. A tax return prepared manually will take longer.
Yes, we can liaise directly with the ATO on your behalf to simplify the process for you.
This will depend on the complexity of the estate, but it may take anywhere from 1-4 months.
We will need to review the last will, the grant of probate (or letters of administration), the deceased’s death certificate, financial records and any correspondence that you have from the ATO.
Yes, we would be glad to help you with any personal tax returns and accounting needs that you may have.