Preparing the Deceased Estate Tax Return – Death & Taxes

If not already done so in Step 12 – Notification of Government Departments & Service Providers of the Death, you will need to inform the Australian Taxation Office (ATO) of the death if the deceased person has ever submitted a tax return and has a Tax File Number (TFN).

Process
You, as the Executor, Administrator or Next of Kin can complete the online form to notify the ATO of the death. You will need to print the form, book an interview appointment at an Australian Post branch within 30 days of completing the form and bring the following documents:

• Certified copy of the Death Certificate;

and one of the following:

• Certified copy of the Will; or
• Certified copy of the Grant of Probate; or
• Certified copy of the Letters of Administration.

If the deceased person did not leave a Will and you have established in Step 27 – Grant of Probate Application or Applying for Letters of Administration that you do not need Letters of Administration, you can provide the ATO with the following documents instead:

• Certified copy of the Death Certificate; and
• a letter explaining why no Letters of Administration are available and which Next of Kin (include the person's address for correspondence) is to be nominated as the Authorised Contact to deal with the Deceased Estate tax affairs.

Once you have notified the ATO of the death, you will receive confirmation via post. When you are the Authorised Contact you can act on behalf of the deceased person with the ATO about the deceased person's tax dealings.

If you need further information, you can contact the ATO by calling 13 28 61.

• Tax returns in relation to the deceased person and Estate for the financial year ending 30 June are generally due for lodgement no later than the 31 October of the same year. If you will likely not manage to complete and submit the tax return(s), you should contact the ATO at 13 28 61 to seek deferral or extension explaining your situation.
• Tax returns completed on behalf of a deceased person must be completed using the ATO paper forms and cannot be submitted online;
• The words 'Deceased Estate' must be written on the top of the first page;
• You as the Executor, Administrator or Next of Kin must sign the tax return on behalf of the deceased person;
• You must state the Tax File Number (TFN) of the deceased person or the Estate depending on the tax return lodged; and
• You will need to apply for a TFN for the Deceased Estate if a Deceased Estate Tax Return needs to be submitted.

Further detail for each type of tax return can be found in Step 32.3 below.

Three types of tax returns exist that may apply to your situation:

• Individual Tax Returns that are outstanding from previous financial years;
• Date of Death Tax Return; and
• Deceased Estate Tax Return.

Depending on your circumstances you may only need to complete one or a combination of these as explained in more detail below.

32.3.1 Outstanding Individual Tax Returns

It is a good starting point to verify if the deceased person has in the past lodged individual tax returns and was supposed to submit tax returns for the years before their death.

You should be able to determine this by checking if in the years leading up to the death the deceased:

• earned a salary from an employer or was self-employed;
• earned interest on bank accounts;
• earned investment returns such as dividends on shares;
• earned money from a trust where the deceased person was a trust beneficiary;
• earned money from capital gains after selling an appreciating asset;
• earned money due to involvement in a business or being a member of a board; or
• any other form of income as defined by the ATO.

Remember that an individual tax return would only be required once those combined earnings in a financial year exceed the tax-free threshold of $18,200 (as at 5 July 2023).

If you think the deceased person did earn income from any of the above, you should check their personal records and look for a Notice of Assessment for previous financial years. This is a summary document the ATO issues after the tax return was assessed. It determines if the individual needs to pay or will receive a tax debit or credit. The notice also shows the deceased person's TFN, which is every Australian's identification number with the ATO.

If you are unable to find these documents, you can check with the ATO on 13 28 61 to find out if and when the last tax return was lodged. Make sure to have the deceased person's TFN handy.

Prepare & Lodge
If you have established that previous tax returns were not completed and are due, you should:

• print the relevant individual tax return forms for previous years online, or order these to be sent to you by post by contacting the ATO on 1300 720 092.
• complete the tax return and write 'Deceased Estate' on the top of the first page;
• write 'THE LEGAL REPRESENTATIVE OF [insert deceased person's full legal name] DECEASED’ for the tax-payer's name;
• sign on behalf of the deceased person (Executor or Administrator only); and
• lodge any outstanding tax returns for previous financial years as soon as possible to avoid additional late fees that may already apply.

If you need experienced support, you can reach out to one of simplyEstate's Trusted Partners as listed to the right or below.

32.3.2 Date of Death Tax Return

Once you have made sure that all individual tax returns for previous financial years were completed and all taxes were paid as outlined in the Step above, you may need to complete a so called 'Date of death tax return'.

This is the final tax return on behalf of the deceased person for the financial year (1 July to 30 June) in which the person passed away.

You should determine if a Date of Death Tax Return is needed if any of the following apply:

• total taxable income was greater than the tax-free threshold of $18,200 (as at 5 July 2023);
• income earned by the deceased person had tax withheld; and
• income tax returns were lodged by the deceased person leading up to the death.

Prepare & Lodge
If you have established that a Date of Death Tax Return is due, you should:

• print the current 2020/21 Income Tax Return Form, or order this to be sent to you by post by contacting the ATO on 1300 720 092.
• complete the tax return and write 'Deceased Estate' on the top of the first page;
• write 'tHE LEGAL REPRESENTATIVE OF [insert deceased person's full legal name] DECEASED’ for the tax-payer's name;
• select ‘No’ where asked if an Australian tax return will be needed in the future;
• sign on behalf of the deceased person (Executor or Administrator only); and
• lodge the ‘Date of Death Tax Return’ for the financial year ending 30 June –

depending on your situation either:

• between 1 July and latest 31 October of that year for normal assessment; or
• before the end of the financial year with an accompanying letter requesting an early assessment.

If you have established that a Date of Death Tax Return is not due, you should:

• complete and lodge a 2020/21 Non-lodgement Advice Form; and
• write ‘DECEASED’ and the date of death where the reason is asked for.

Read the ATO website for more information about doing a date of death tax return.

If you need experienced support, you can reach out to one of simplyEstate's Trusted Partners as listed to the right or below.

32.3.3 Deceased Estate Tax Return (Trust Tax Return)

While you as the Executor, Administrator or Next of Kin administer the Deceased Estate, you act as the trustee of the Estate, which is considered a trust. This is not the same as a testamentary trust explained earlier in Step 29 – Opening a Testamentary Trust per the Will.

If capital gains were generated from the sale of assets or income was generated while the Deceased Estate is being administered, a trust tax return will need to be submitted for all financial years until the Estate is completely finalised and distributed.

Types of income may include:

• interest on 'Estate of Late' bank accounts;
• investment returns such as dividends on shares;
• income from an investment property or letting the deceased person's home;
• income from a trust as a Beneficiary;
• income from capital gains after the sale of an appreciating asset;
• income from dividends;
• money from a business; or
• any other form of income as defined by the ATO.

You will need to complete and submit a trust tax return if the total income of the Estate was above the tax-free threshold of $18,200 (as at 5 July 2023).

Prepare & Lodge
If you have established that a Deceased Estate Tax Return is due, you should:

• print the current 2020/21 Trust Tax Return Form, or order this to be sent to you by post by contacting the ATO on 1300 720 092.
• write 'tHE Estate OF [insert deceased person's full legal name] DECEASED’ for the trust name;
• enter the letter ‘D’ in the Type of Trust box on page 2 and add the date of death;
• sign on behalf of the deceased person (Executor or Administrator only); and
• lodge the 'trust Tax Return’ for the financial year ending 30 June, between 1 July and latest 31 October of that year.

Note: You may need to declare taxes in the trust tax return or withhold taxes for Beneficiaries that are under 18 years of age or not an Australian resident.
Where the Beneficiary is 18 years or older and an Australian resident for tax purposes, the Beneficiary needs to include any income from the Deceased Estate, other than inheritance, in their individual income tax return.

Superannuation and life insurance benefit payments may include taxable components depending on who receives the payment as discussed in Steps 24 and 25.

Read the ATO website for more detail about:

• income and paying taxes during the Estate administration; and
• instructions for trust tax returns.

Where your situation is more complicated, or you are unsure if you need to submit a trust tax return, contact one of simplyEstate's Trusted Partners listed to the right or below.

If you have completed the administration of the Deceased Estate, except for the final tax return, you may want to consider making an interim distribution.

Reasons for an interim distribution could be:

• you have finalised the administration halfway into the financial year and would need to wait for a considerable amount of time before being able to distribute the Estate to Beneficiaries; and/or
• you want to reduce the need to pay interest if the administration has already taken close to 12 months.

Ascertain that you read through and completed all the necessary items outlined in Step 33 and Step 34 (and anything else depending on your situation) to reduce your personal liability as much as possible.

If you decide to make an interim distribution to beneficiaries, you should calculate the estimated tax liability owed to the ATO based on income and capital gains generated, and retain that amount with sufficient contingency in the Estate.

You can then distribute the Estate (while keeping enough money aside for taxes) to the beneficiaries as per the Will or relevant state/territory legislation.

Note: It is recommended to clearly communicate and seek agreement about the distribution, as outlined in Step 33 – Communicating the Inheritance & Preparing an Estate Distribution Letter to Beneficiaries. It should also be noted that the distribution is interim and subject to final tax liability payment. The beneficiaries should know to expect a final distribution of the remainder once the final tax payment was made.

Where your situation is more complicated, or you are unsure if you need to submit a trust tax return, contact one of simplyEstate's Trusted Partners listed to the right or below.