How to handle deceased estate tax returns

There are generally two types of tax returns to be lodged after a person’s death:

  • An individual tax return up to the date of death, and
  • A separate return for the deceased estate for income received after the date of death.

The date of death tax return is prepared in the same manner as if the individual were still alive.

If the person is an Australian resident general individual tax rates with the full tax-free threshold also apply, along with in many cases, the Medicare levy and Medicare levy surcharge.

When someone dies, there is usually only one person responsible for the administration of the deceased estate.

They are known as the executor/trustee, or personal legal representative, and for tax purposes, a deceased estate is treated as a trust.

For appropriate guidance on the lodgment of deceased estate tax returns, please contact the experienced agents at Tax Return Perth.

What is involved in a deceased estate tax return?

When filing a deceased estate return, the executor/trustee is required to lodge the following:

  • A final return of personal income tax from July 1 to the date of death of the individual
  • The trust income return for the deceased estate.

Both the individual’s personal income tax return and that of the deceased estate are treated as separate tax returns.
Also, tax on the deceased estate is only payable if it earns income after the owner’s death.

The trustee is required to lodge an income tax return for the deceased estate if:

  • The estate receives any kind of capital gains
  • It receives dividends
  • It derives income from any tax that has been withheld
  • It receives income from any associated businesses.

Because deceased estate tax returns can be complex, you should always seek assistance from the qualified agents at Tax Return Perth. This will also help you save dollars on your tax liability.

Instructions to trustees of deceased estates

  • When lodging a deceased estate trust tax return, a trustee must follow all necessary instructions and regulations.
  • It is also important to remember that it is only income from the estate, received after the person’s death, that is taken into consideration on the return.
  • Situations vary, but in some cases the executor may need to lodge a trust tax return after the death of the person for each income year until the deceased estate is fully administered (and all of its assets and income are distributed to the beneficiaries), and it is no longer earning income.
  • A testamentary trust may also be established under the terms of a will.
  • It is not the same trust as the deceased estate and can last for many years after the deceased estate has been fully administered.
  • Additionally, there may be some tax obligations for beneficiaries depending on the nature of any distribution they receive, such as super death benefits, capital gains tax on disposal of assets, etc.
  • It is also worth noting that if you as a beneficiary are entitled to income from a deceased estate, that income is always assessable in the year your present entitlement arises; not the year the amount is received.
  • For example, if you are entitled to deceased estate income on 30 June, 2019 but did not receive the income until September 2019, you are personally assessable on that amount in the year ending 30 June 2019; not 30 June 2020.
  • Lastly, it is worth remembering that you can only lodge tax returns after death for a deceased person’s estate using a paper tax return.

Always get help from an expert tax accountant

Filing income tax returns after death is a complex process. Therefore, it is advisable to always seek professional help and get in touch with an expert accountant from Tax Return Perth.

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