Managing the tax affairs of someone who has died
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Managing the tax affairs of someone who has died
Introduction
This guide will help you finalise the tax affairs of a deceased person. It tells you what tax returns you may need to lodge
and how the tax liability will be worked out.
General law
The law that applies to the assets and income of a deceased person depends on which state or territory of Australia the
deceased person lived in when they died.
If you have been appointed as an executor or administrator of the estate of a deceased person, you will be responsible for
managing the deceased estate's tax affairs, as well as:
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carrying out (executing) the terms of the deceased person's will, or
complying with the relevant inheritance laws where there is no will.
You can find more information about the inheritance laws that apply in your state or territory by contacting the Public
Trustee Office.
Wherever the word ‘executor’ is used in this document, it applies equally to an executrix, trustee, administrator or legal
personal representative.
Taxation law
There are no death duties in Australia.
However, the Income Tax Assessment Act 1997 does tax certain income or capital transactions that occur as a
consequence of a person's death.
The tax consequences are different from the perspective of:
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the deceased person
the executor, or
a beneficiary of the deceased estate.
What is a deceased estate?
The property and assets belonging to a person who has died is called their deceased estate. The deceased estate is held
in trust from the death of the person until the transfer of the property and assets to the beneficiaries. The deceased estate
is considered to be a trust during this period. Unlike a natural person or a company, a trust is not a legal entity in its own
right, but a relationship involving a trustee and the beneficiaries.
The executor of the estate is the person who holds the deceased estate in trust. That person is the trustee for the
deceased estate trust. The executor is responsible for administering the deceased estate in the best interest of the
beneficiaries.
Beneficiaries are those people who share in the deceased estate. They are usually named in the will, where one exists. If
no will exists, they are usually the deceased person’s next of kin.
What does an executor do?
An executor is appointed by the deceased person's will to administer their deceased estate in accordance with their will.
The Supreme Court can also appoint an administrator to deal with the deceased estate – for example, where there is no
valid will or the person nominated to be executor cannot discharge their duties.
The executor, in effect, steps into the shoes of the deceased person and winds up the deceased person's personal affairs.
Some other tasks usually performed by an executor include:
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locating the will
arranging the funeral
applying for probate
obtaining a death certificate
informing investment bodies of the death
informing Centrelink
locating and assessing the value of assets
paying debts, income tax and funeral expenses
transferring assets and paying stamp duty, and
distributing the surplus to beneficiaries.
Appendix A provides an illustration of the different stages of administration of a deceased estate.
What forms part of a deceased estate?
Assets owned by the deceased person form part of the deceased estate. For example, real estate, money in bank
accounts, shares, and personal chattels. Some types of income will also form part of the deceased estate.
Some assets will not be included in the deceased estate because the deceased person has made other arrangements to
distribute those assets.
Superannuation and life insurance payments
Superannuation and life insurance payments may or may not form part of the deceased estate. If there are stipulated
beneficiaries under the policies, the payments may go directly to the beneficiaries without going through the deceased
estate.
Jointly owned assets
Assets that are jointly owned may or may not form part of the deceased estate. This will depend on the type of coownership. There are two categories of co-ownership:
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joint tenancy, and
tenancy-in-common.
When a joint tenant dies, their share in the asset is extinguished and they cannot pass the asset to their estate. The
surviving owner becomes the sole owner. The most common type of asset held in joint tenancy is the family home.
When a tenant-in-common dies, their share passes to their deceased estate. Hence, the executor can deal with that share
in the asset.
In the case of real estate, the title deed usually specifies the type of co-ownership. Under common law, joint tenancy of
real estate is presumed in the absence of contrary intention.
For other assets like bank accounts and shares, the type of ownership is often not stipulated. The contract or purchase
documentation may provide clues.
What is a will?
A will is a legal document that sets out directions for the administration and disposal of your property after your death.
What is probate?
Where the deceased person leaves a will, the executor needs to obtain probate before they can distribute the assets of
the deceased estate to the beneficiaries. Probate is granted by the Supreme Court in the state or territory in which the will
is lodged. Probate is the Supreme Court's authority to the executor to administer the deceased estate.
People who believe they have an entitlement to part of the deceased estate or creditors of the deceased person (for
example, the Tax Office if there is an outstanding tax liability), can contest the will before probate.
What happens if the deceased person did not have a valid will?
If the deceased died without a valid will (intestate), letters of administration need to be obtained from the Supreme Court
appointing someone to administer the deceased estate.
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In such situations, the assets of the deceased person are distributed in accordance with the succession laws of the states
and territories of Australia. Generally, that means the estate passes to the deceased person’s next of kin.
What is a testamentary trust?
A testamentary trust is a trust established by a will. It does not come into effect until after the death of the person making
the will. At this point in time, specified deceased estate property is transferred to a trustee who holds the assets on trust
for the benefit of the beneficiaries. A testamentary trust is not the same trust as the deceased estate.
A testamentary trust may last for many years after the deceased estate has been fully administered. The information
provided in this document is not appropriate for testamentary trusts.
Tax obligations of executors
Role of executor
An executor has certain taxation responsibilities on behalf of the deceased person and the deceased estate.
Some of the responsibilities include:
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notifying the Tax Office of the death, to stop the issue of any notices which may cause distress to partners or other
relatives
lodging prior year tax returns on behalf of the deceased person
lodging a 'date of death' (final) personal tax return on behalf of the deceased person
applying for a trust tax file number for the deceased estate if trust tax returns need to be lodged
preparing and lodging trust tax returns for the deceased estate, if necessary
making distributions to beneficiaries, and
paying tax on behalf of certain beneficiaries.
Any tax liability that may arise from your role as executor is separate from your own personal tax liability.
You do not include any of the income of the deceased person or deceased estate in your own personal tax return, except
for any trust income you received as a beneficiary.
Authority to deal with the tax affairs of the deceased person
For you to deal with the deceased person’s tax affairs, you will need proof that you have the authority to do so.
After you have been appointed executor, you should write to the Tax Office with details of the deceased person’s:
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full name
date of birth
date of death
address for services of notices, and
tax file number, if known.
You will need to provide proof of identity for yourself and documents such as the death certificate and the will or evidence
of the grant of probate or letter of administration (when it is granted – this may be some time after you lodge the deceased
person's tax returns).
The tax file number of the deceased person cannot be disclosed to you until you have established your authority. Once
that is done, you can request the tax file number of the deceased person over the phone or have it sent to you.
Tax return for the deceased person
If the deceased person did not lodge prior year tax returns, you will need to determine whether they are necessary. If
required, you need to prepare and lodge them.
There may be a number of reasons why you may have to lodge a personal tax return for the deceased person.
For example:
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tax has been withheld from the income earned by the deceased person
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the deceased person earned taxable income exceeding the tax-free threshold
tax has been withheld from interest or dividends because no tax file number was quoted to the investment body, or
the deceased had lodged returns in prior years.
To determine if a final tax return for the deceased person is required, read Do I need to lodge a tax return?
Final tax return not required for deceased person
If you have determined that a final tax return is not required, please complete the Non-lodgment advice 2006-07
(NAT 2586-6.2007) and send it into the Tax Office.
On the form, where it asks for the reason, please print ‘DECEASED’ followed by the date of death.
Final personal tax return required for deceased person
If the deceased person has been lodging tax returns prior to their death, you will need to submit a final tax return on behalf
of the deceased person.
This will be the final personal tax return of the deceased person with their personal tax file number. This tax return is
known as the ‘date of death return’.
That tax return should cover the period from the previous 1 July to the date of death. For example, if the date of death was
6 March 2007, the date of death tax return will cover the period 1 July 2006 to 6 March 2007.
The final tax return should include all assessable income derived by the deceased person and all the tax-deductible
expenses incurred up to the date of death. (Income derived after the date of death, and any deductible expenses incurred
after the date of death, are included in the deceased estate's trust return.)
Examples of assessable income include:
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salary or wages
bank interest
dividends from share investments
trust distributions from managed investment funds
rent from investment properties, and
capital gains from the sale of assets.
Examples of tax-deductible expenses include:
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work-related expenses like tools of trade, uniform or professional publications
tax related expenses incurred by the executor in relation to the income tax affairs of the deceased person
ongoing management fees paid to investment advisers
bank charges, and
rental expenses in relation to an investment property.
Gifts made under a will are not tax deductible unless the gift is made under the cultural bequest program. In such
instances, the deduction is allowable in the date of death tax return of the deceased person.
A claim for medical expenses tax offset may be made in relation to net medical expenses incurred by the deceased
person. This includes the amounts incurred by the deceased person but paid by you, as the executor of the deceased
estate.
Funeral expenses are not tax deductible nor are they eligible for the medical expense tax offset.
Losses
If the deceased person has accumulated losses at the date of death, those losses can be offset against income in the final
tax return (capital losses may be offset against capital gains), but cannot be carried forward into the deceased estate.
Ordinary losses as well as capital losses that cannot be offset in the final tax return for the deceased will lapse.
Completing the tax return
When preparing the final tax return for the deceased person, you need to:
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print the words ‘DECEASED ESTATE’ on the top of page one of the tax return
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print ‘X’ in the ‘NO’ box at the question ‘Will you need to lodge an Australian tax return in the future?’
sign the tax return on behalf of the deceased person.
Note:
When completing the Medicare levy questions:
Question M1: If the deceased person (and any dependants) were fully exempt from the Medicare levy until their
death, the number of days that they are exempt from the Medicare levy (Label V) in this return is 365.
If the deceased person was half exempt from the Medicare levy until their death, the number of days that they are
half exempt from the Medicare levy (Label W) in this return is 365.
Question M2: If the deceased person (and any dependants) were covered by private hospital cover or were
exempt from the Medicare levy until their death, the number of days that they do not have to pay the Medicare levy
surcharge (Label A) in this return is 365.
Any refunds from this final tax return will be sent to you as the executor. Similarly, any tax liabilities of the deceased
person are to be paid by you out of the deceased estate. You need to withhold amounts from the assets or income of the
deceased estate to pay this liability.
Tax rates for final tax return of deceased person
The general individual tax rates, with the full tax-free threshold, apply to the final tax return of the deceased person, if an
Australian resident. The Medicare levy and Medicare levy surcharge may also be payable.
Higher Education Contribution Scheme (HECS) debt and Student Financial
Supplement Scheme (SFSS)
The trustee or executor of a deceased person is required to lodge all outstanding tax returns up to the date of death of the
person. If the deceased person had an accumulated HECS and/or SFSS debt at the time of their death, a compulsory
HECS/SFSS repayment will be calculated. Compulsory repayments will be raised in the income tax notice of assessment
when the minimum repayment thresholds are reached ($38,149 in 2007 for HECS debt and $38,149 in 2007 for SFSS
debts).
Any compulsory HECS and/or SFSS repayment included on an income tax notice of assessment which relates to the
period before death must be paid by the deceased estate. The remainder of the accumulated HECS and/or SFSS debt is
cancelled.
For more information on HECS/SFSS and how compulsory repayments are calculated, read
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Repaying your HELP debt in 2006-07, and/or
Repaying your Financial Supplement loan 2006-07.
How to get a tax return
The individual tax return is part of TaxPack. Read TaxPack 2007 for information on how to obtain a copy.
Tax clearance
The Tax Office no longer issues letters of clearance, stating that income tax liabilities to the date of death have been
satisfied. The notice of assessment in respect of the date of death return will constitute the formal notification where:
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all the liabilities on the notice have been satisfied, or
the notice states that no tax is payable.
Where the deceased person has not lodged a return for several years, the last notice of assessment will serve the same
purpose.
Taxation of the deceased estate
After the date of death, the deceased estate may receive income from various sources (see Assessable income). A trust
tax return will need to be lodged for the deceased estate if there is tax payable on the income or if tax has been withheld
from that income.
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A trust tax return will need to be lodged each income year until the deceased estate is fully administered (that is, all of its
assets and income are distributed to the beneficiaries) and no longer deriving income.
The net income of the deceased estate is taxed either in the hands of:
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the beneficiaries who are presently entitled, or
the executor.
Assessable income
Any income derived after the date of death belongs to the deceased estate. Income derived after death may include:
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salary and wages unpaid at the date of death
bank interest
eligible termination payments
dividends from share investments
trust distributions from managed investment funds
investment income from a friendly society funeral policy taken out after 31 December 2002 (for more information,
read Tax changes for friendly society funeral polices).
rent from investment properties, and
capital gains from the sale of assets.
Amounts for annual and long service leave paid to the deceased person’s beneficiaries or the executor are exempt from
tax.
Eligible termination payments (ETPs)
Sometimes, you may receive a payment called a death benefit eligible termination payment. This payment may be paid by
the deceased person’s employer, superannuation fund, approved deposit fund or from a retirement savings account.
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This amount is tax-free when it is within the reasonable benefit limit (RBL), and
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passed on to the deceased person’s dependants. In this context a dependant is someone who is financially
dependent, but it will always include the spouse of the deceased.
There are many special rules with for ETPs. For more help with such payments, phone 13 10 20.
If there are amounts of an ETP that are assessable, include them under ‘Other income’ in the trust tax return.
Tax-related expenses
Expenses incurred by the deceased estate in earning assessable income may be tax deductible. For example:
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tax agent’s fees
ongoing management fees paid to investment advisers
bank charges, and
rental expenses for an investment property.
Gifts made pursuant to a will are not tax deductible unless the gift is made under the cultural bequest program (in which
case it must be included in the date of death return, not in the trust return).
Losses
If the deceased person has accumulated losses at the date of death, those losses cannot be carried forward into the
deceased estate. Ordinary losses as well as capital losses will lapse at the time of death.
Tax file number for the deceased estate
A tax file number is required to lodge a deceased estate’s tax return. You will need to complete an application form, Tax
file number application or enquiry for a deceased estate, for a trust tax file number and provide certain proof of identity
documents.
This trust tax file number may be quoted to investment bodies where investments are still held by the deceased estate. It
is not appropriate to quote your personal tax file number in the circumstances.
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Paying tax on the income of the deceased estate
There are many factors that will determine who pays the tax on the income derived by the deceased estate and the
applicable tax rate.
They include whether the beneficiaries are presently entitled, whether they are under a legal disability and whether the
deceased estate is fully administered. A summary of the different tax situations is provided in Appendix B.
While the deceased estate is under your administration, you will need to determine whether the beneficiaries are presently
entitled and under any legal disability at the end of each financial year (30 June). This will determine who is liable to pay
tax on the income of the deceased estate.
As executor, you cannot distribute the income or assets of a deceased estate until the debts of the deceased person,
including tax liabilities, are determined and probate has been granted.
You can distribute some of the income or assets to beneficiaries if you are certain that the remainder of the deceased
estate is sufficient to cover any outstanding liabilities.
Meaning of present entitlement
Beneficiaries are presently entitled to the income of a deceased estate if they have an indefeasible, absolutely vested
interest in the income. In other words, the beneficiaries have a claim or interest in the income that cannot be defeated by
another person. They must also be able to demand immediate payment of the income. This means that beneficiaries can
be presently entitled even though they may not have actually received an income distribution.
Generally, beneficiaries are not presently entitled to the income of a deceased estate during the administration of the
estate. This is because the debtors of the deceased person and any persons contesting the will may be able to defeat the
beneficiary's right to the income. This means that during this period, the income belongs to the deceased estate and not
the beneficiaries.
However, as administration progresses, it may become clear to you that part of the net income of the deceased estate will
not be required to either pay or provide for debts. You may exercise your discretion and pay some of the income to the
beneficiaries. The beneficiaries in this situation will be presently entitled to the income actually paid to them or actually
paid to someone else on their behalf.
Beneficiaries can be presently entitled if, under the terms of the will, money (income of the deceased estate) is applied for
their benefit and not paid directly to them. An example is the payment of the beneficiary’s rent.
No beneficiary is presently entitled to any income accrued by the deceased person at the date of death but only received
after death.
Meaning of legal disability
People are considered to be under a legal disability if they cannot give a valid discharge for money paid to them.
Beneficiaries are under a legal disability if they are either:
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minors (that is, under 18 years of age as at 30 June)
bankrupt, or
declared legally incapable because of a mental condition.
When this group of persons become presently entitled to income of the deceased estate, you as executor will be assessed
on their behalf.
The income year in which the deceased estate is fully administered
The net income of the deceased estate (and whether any beneficiary is presently entitled) is determined on the last day of
each income year (30 June). This means that, on the last day of the income year, a beneficiary who is presently entitled
will be assessed on their share of the net income for the whole of the income year.
However, in the income year in which the deceased estate is fully administered, the Tax Office will accept an
apportionment of the net income received. Where the executors and beneficiaries are able to demonstrate, through proper
accounts at the completion of administration, the actual amounts of income derived in the periods before and after the day
on which the estate was fully administered, an apportionment may be made as follows:
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Income derived in the period between . . .
is assessed . . .
the beginning of the income year and the day administration
was complete
in your hands as the executor.
the day administration was complete and the end of the income to the beneficiaries who are presently
year
entitled.
Where beneficiaries are under a legal
disability, you as executor will be
assessed on their behalf.
For such an apportionment to take place:
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there must be evidence of the income derived during these periods, and
you (as the executor), or the beneficiaries, must request it.
The Tax Office does not accept an apportionment into the two periods merely on a time basis.
One exception is when you (as executor) pay part of the income of the deceased estate to a beneficiary before the estate
is fully administered. In such an instance, the beneficiary would be assessed on the basis that they were presently entitled
to that income.
Lodging the deceased estate’s trust tax return
After you have determined whether the beneficiaries are presently entitled and whether they are under any legal disability
at the end of the financial year, you are then required to lodge a trust tax return for the deceased estate (if you are liable to
pay tax for the deceased estate).
If the deceased estate is paying tax on franked dividends, the imputation credits need to be claimed back through this trust
tax return.
You will need a copy of a Trust tax return 2007 and the accompanying Partnership and trust tax returns instructions 2007.
Special instructions for executors of deceased estates are contained in the guide.
If you need assistance with completing the trust tax return for the deceased estate, phone us on 13 28 61.
Tax rates for the deceased estate
Tax rates – beneficiary not presently entitled
To the extent beneficiaries are not presently entitled to the net income of the deceased estate, the tax liability will rest with
the deceased estate.
First three income years
For the first three tax returns, the deceased estate income to which no beneficiary is presently entitled is taxed at the
general individual rates, with the benefit of the full tax-free threshold. No Medicare levy is payable.
Read Individual income tax rates.
Example
The deceased passed away on 5 April 2005.
The first tax year for the deceased estate will cover the period 6 April 2005 to 30 June 2005.
The second tax year will be from 1 July 2005 to 30 June 2006.
The third tax year will be from 1 July 2006 to 30 June 2007.
If the deceased estate earned taxable income of $6,000 or less during those first three tax returns, there is no tax
payable.
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This concessional period of three tax years at the general individual rates, with the benefit of the full tax-free threshold,
cannot be extended.
If the administration of the deceased estate is completed in the same income year as the date of death, you do not need
to lodge a trust tax return for the deceased estate if:
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no beneficiary is presently entitled to any of the income of the deceased estate (they may receive assets only),
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the taxable income of the estate is below the tax-free threshold of $6,000 (for the 2007 income year).
Fourth income year and later
For deceased estates with prolonged administration that extend beyond the concessionally taxed period, there are special
progressive trust tax rates that will apply.
Example
The deceased passed away on 5 April 2004.
The first tax year for the deceased estate will cover the period 6 April 2004 to 30 June 2004.
The second tax year will be from 1 July 2004 to 30 June 2005.
The third tax year will be from 1 July 2005 to 30 June 2006.
The fourth tax year will be from 1 July 2006 to 30 June 2007.
It is from the fourth tax year that the special progressive tax rates will apply.
For the 2007 income year, the special progressive tax rates are:
Deceased estate taxable income
(no present entitlement)
Tax rates
$0 - $416
Nil
$417 - $594
50% of the excess over $416
$595 - $25,000
$89 plus
15% of the excess over $594
$25,001 - $75,000
$3,750 plus
30% of the excess over $25,000
$75,001 - $150,000
$18,750 plus
40% of the excess over $75,000
$150,001 and over
$48,750 plus
45% of the excess over $150,000
No Medicare levy is payable.
Tax rates – beneficiary presently entitled and not under a legal disability
If the beneficiary is presently entitled and not under a legal disability, they are liable for tax.
For example, if you make an income distribution to an adult resident beneficiary, it is the responsibility of that person to
declare the amount in their personal tax return and pay income tax on it at their marginal tax rate.
Tax rates - beneficiary presently entitled but under a legal disability
If the beneficiary is presently entitled, but under a legal disability, you will be liable to pay tax on their behalf. You will be
assessed separately for each beneficiary in this category.
The general individual tax rates apply. These rates are set out in Individual income tax rates.
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Normally, unearned income of minors is subject to tax at higher rates and a lower tax-free threshold. However, for
distributions from a deceased estate, the ordinary tax rates apply.
Medicare levy
Medicare levy and Medicare levy surcharge are also payable in the same way as if the income was assessed to the
beneficiary. For more information, read What is the Medicare levy?
Tax offsets
You are also entitled to tax offsets to which the beneficiary would be entitled – for example, the dependent spouse,
medical expenses and 30% private health insurance tax offsets. The low income tax offset is automatically calculated if
the income is below the relevant threshold.
You will need to include a statement with the tax return showing the type and amounts of tax offsets claimed.
Tax rates – non-resident beneficiary
If the beneficiary is a non-resident of Australia for taxation purposes, you are liable to pay tax on the beneficiary’s share of
the trust income distributed.
The non-resident tax rates apply. These are set out in Individual income tax rates.
No Medicare levy is payable.
Interest and dividends are not included in the non-resident beneficiary's trust income. Instead, these are taxed by having a
non-resident withholding tax withheld and paid to the Tax Office. The withholding tax rate varies for different countries and
between interest and dividends. Fully franked dividends are not subject to withholding tax. To find the appropriate
withholding rate, phone us on 13 28 61.
Information for beneficiary
Beneficiaries who are presently entitled may need to lodge personal tax returns and disclose their trust distributions.
Accordingly, they need to know certain information about their entitlement.
All beneficiaries who are presently entitled should be provided with the following information:
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their share of trust income that they were presently entitled to
the amount of their entitlement that was applied for their benefit
the amount that is assessable to them, and
their share of imputation credits associated with any dividends that may be in the trust distribution.
Beneficiaries presently entitled but under a legal disability also need to know the amount of tax you have paid on their
behalf. They are entitled to receive a tax credit for this tax so that the same amount will not be taxed twice.
Non-resident beneficiaries will also need to know:
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the amount of interest in their distribution and the withholding tax paid
the amount of unfranked dividends in their distribution and the withholding tax paid
the amount of franked dividends in their distribution, and
the amount of tax you have paid on their behalf.
Tax obligations of beneficiaries
A beneficiary is a person who receives all or part of the deceased estate. If a will exists, it usually sets out how the
deceased estate and income should be dealt with.
There may be some tax obligations for beneficiaries, depending on the nature of any distribution they may receive. As the
executor, you should provide details of trust distributions to the beneficiaries.
Corpus distribution
If the trust distribution represents corpus of the deceased estate, no tax is payable by the deceased estate or the
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beneficiary.
Corpus is the capital amount or income that has already been subject to tax to the deceased estate – for example, the
capital sums in a bank account.
If the distribution takes the form of a transfer of asset, there may be capital gains tax consequences to the beneficiary.
Income distribution
If the trust distribution consists of income of the deceased estate, the tax implications to the beneficiaries depend on
whether they are presently entitled to the income.
If the estate income is applied on behalf of the beneficiaries, they are considered to be presently entitled to the amount,
even though they did not receive any money in their hands. An example is the payment of the beneficiary’s rent.
Presently entitled and under no legal disability
Australian resident beneficiaries who are presently entitled and not under any legal disability, will be personally liable to
pay tax on the income distribution.
They will need to disclose that income distribution from the deceased estate in their personal tax return and pay tax at the
general individual tax rates.
The income will be assessable in the year the present entitlement arose, not in the year the amount is received.
For example, if a beneficiary was presently entitled to the deceased estate income on 30 June 2007, they are personally
assessable on that amount in the year ended 30 June 2007, even though the amount may be received after that date in
the following tax year.
Presently entitled and under legal disability
For those beneficiaries who are presently entitled but under a legal disability (for example, under 18 years old), you as
executor of the deceased estate should have paid tax on their behalf in respect of the income distribution.
If that income distribution from the deceased estate is their only source of income for the year, they do not need to lodge a
personal tax return.
If the beneficiaries have other income, they need to lodge a personal tax return that includes the income distribution from
the deceased estate. However, they will be entitled to a credit for the tax paid or payable by you on their behalf.
Overseas deceased estate
For Australian resident beneficiaries, the rules are the same, regardless of whether the deceased estate is in Australia or
overseas. Where the income distribution from an overseas deceased estate has been subject to foreign tax, they may be
entitled to a foreign tax credit. (Read How to claim a foreign tax credit 2006-07 (NAT 2338-6.2007).)
Franked dividends
If some of the income distribution from the deceased estate consists of franked dividends (that is, the company paying the
dividends has paid income tax in respect of the amount), resident beneficiaries are also entitled to the associated franking
credit when the income distribution is disclosed in their personal tax returns.
That is why you need to inform them of their share of any franking credits associated with the franked dividends.
To find more information about the dividend imputation system, read Refunding franking credits – individuals.
Capital gains tax
When you transfer or sell assets of the deceased estate, there may be capital gains tax consequences. There are special
capital gains tax rules regarding such assets.
For more information, read Deceased estate and capital gains tax.
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Checklist
To fully meet the taxation obligations, you may need the following from the Tax Office:
z
z
z
z
z
z
z
z
z
tax file number of the deceased person
Non-lodgment advice 2006-07 (NAT 2586-6.2007)
TaxPack 2007 (including the personal tax returns)
Tax file number application or enquiry for a deceased estate
Trust tax return 2007
Partnership and trust tax returns instructions 2007
Guide to capital gains tax 2006-07 (NAT 4151-6.2007)
Guide to capital gains tax concessions for small business
Taxation Ruling IT 2622: Present entitlement during the stages of administration of deceased estates
Do you need to know more?
For more information about deceased estates, you can:
z
z
phone us on 13 28 61, or
seek advice from a professional adviser.
Appendix A - stages of administration of a deceased estate
The period of administration begins at the date of death and ends when the administration of the estate is complete.
Date of death
Stages of administration
Period of administration
1.
2.
3.
4.
Burial of deceased person
Executor appointed by will or administrator appointed by Court
Probate applied for and granted by Court
Assets vested in executor who administers estate
{ date of death and trust tax return lodged
{ initial stage – net income of estate is applied to reduce debts
(including tax liabilities) etc
{ intermediate stage – part of the net income of estate that is not
required to pay debts etc may be paid to beneficiaries
{ final stage – debts etc are paid or provided for in full and net
income and assets of the estate are distributed to beneficiaries.
Administration of estate is complete
Appendix B - a summary of how deceased estate income is taxed in
relation to Australian resident beneficiaries
If the income is an
amount to which . . .
then . . .
a beneficiary is presently
entitled
determine whether or not
the beneficiary is under a
legal liability
the income is
assessed . . .
the tax rates which
apply . .
if the beneficiary is under a to the executor on
legal liability
behalf of the
beneficiary
general income tax rates
apply
if the beneficiary is not
under a legal liability
to the beneficiary on
their personal income
tax return
the beneficiary’s marginal
tax rates will apply
the executor is
assessed on the
income
concessional tax rates
apply for the first three tax
returns of the deceased
estate.
no beneficiary is presently
entitled
Last Modified: Wednesday, 6 June 2007
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Page 13 of 13
Copyright
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