TB 20
Estate planning: Taxation of
deceased estates
Issued on 15 November 2010.
Summary
Under Australian law there are no death duties,
however, income and some capital transactions may
be taxed as a consequence of a person’s death. Tax
consequences may differ from the perspective of the:
• deceased person
• executor, or
• beneficiary of the deceased estate.
We focus on the responsibilities of the executor
when administering a deceased estate and the tax
treatment of income and assets when received by
the deceased estate or a beneficiary.
Stages of administration of a
deceased estate
There are a number of stages of administration of
a deceased estate. These include:
• burial of deceased person
• lodging previous tax returns on behalf of the
deceased person, if required
• lodging '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 in the future
• preparing and lodging trust tax returns for the
deceased estate, if necessary
• making distributions of income and capital of
the estate to beneficiaries
• paying tax on behalf of certain beneficiaries.
Any tax liability that may arise as the executor of
an estate is independent of the executor’s
personal tax liability.
Authority to deal with the tax
affairs of the deceased person
• assets vest in executor who administers estate
An executor of an estate will need proof of their
authority if they are to deal with the tax affairs of
the deceased. Once a person has been appointed
as an executor of the estate they should write to
the ATO with details of the deceased person’s:
• date of death and trust tax return lodged
• full name
• initial stage: net income of estate is applied to
• date of birth
• executor appointed by Will or administrator
appointed by Court
• apply for probate and granted by Court
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 estate are
distributed to beneficiaries.
Tax responsibilities of executor
An executor of a deceased estate has certain
taxation responsibilities both on behalf of the
deceased person and the deceased estate. Some
of the responsibilities include:
• notifying the Australian Tax Office (ATO) of the
person’s death, to stop the issue of any notices
which may cause distress to partners or other
relatives
• date of death
• contact address, for example, tax agent or the
executor
• tax file number, if known.
An executor will need to provide proof of their
identity and documents such as the death
certificate and the Will of the deceased or letter of
probate (when it is granted – this may be some
time after the executor lodges the deceased
person's tax returns).
The tax file number of the deceased person cannot
be disclosed by the ATO to the executor until they
have established their identity. Once that is done,
the executor can request the tax file number of
the deceased person over the phone or have it
sent to them.
Taxation of income received before
death
Examples of assessable income include:
• salary or wages
• bank interest
Tax return for the deceased person
• dividend from share investments
The executor is required to lodge all outstanding
tax returns up to the date of death of the person.
• trust distribution from managed investment
funds
There may be a number of reasons why a personal
tax return for the deceased person may be
required. This may include:
• rent from investment properties
• capital gain from the sale of assets.
• tax has been withheld from the income earned
by the deceased person prior to their death
Examples of tax-deductible expenses include:
• the deceased person earned taxable income
• work-related expenses like tools of trade,
exceeding the tax-free threshold
uniform or professional publication
• tax has been withheld from interest or dividends
• tax related expenses incurred by the executor in
because no tax file number was quoted by the
deceased to the investment body
relation to the income tax affairs of the
deceased person
• the deceased had lodged tax returns in prior
• on-going management fees paid to investment
years.
advisers
• bank charges
Final tax return not required for deceased
person
• rental expenses in relation to an investment
property.
If the executor has determined that a final tax
return is not required, they, or the deceased’s tax
adviser should complete a ‘Non-lodgment advice
form’ and send it into the Tax Office. On the form,
where it asks for the reason for not lodging a tax
return, ‘DECEASED’ should be printed followed by
the deceased person’s date of death.
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 the executor of the deceased estate.
Date of death return required for deceased
person
If the deceased person has been lodging tax
returns prior to their death, the executor will need
to submit a final tax return on behalf of the
deceased. 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’.
Funeral expenses are not tax deductible nor are
they eligible for the medical expense tax offset.
Tax rates for final tax return of deceased
person
The general personal tax rates, with the full taxfree threshold, will 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.
That tax return should cover the period from the
previous 1 July to the date of death. For example,
if the person’s date of death was 6 March 2010,
the date of death tax return will cover the period 1
July 2009 to 6 March 2010.
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).
Higher Education Loan Program (HELP)
debts and Student Financial Supplement
Scheme (SFSS)
If the deceased person had an accumulated HELP
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.
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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.
• employment termination payments
• superannuation death benefits
• dividend from share investments
• trust distribution from managed investment funds
On 1 June 2006, all outstanding Higher Education
Contribution Scheme (HECS) debts became
accumulated HELP debts. The SFSS was a loan
scheme to help tertiary students cover their study
expenses and closed on 31 December 2003.
• investment income from a friendly society funeral
policy taken out after 31 December 2002
• rent from investment properties
• capital gain from the sale of assets.
Amounts for annual and long service leave paid to
the deceased person’s beneficiaries or the
executor are not taxed.
Tax clearance
The notice of assessment, received after the date
of death return is lodged, is formal notification
that all income tax liabilities to the date of death
have been satisfied where:
Superannuation death benefits
• all the liabilities on the notice have been
A superannuation death benefit may be paid to the
deceased estate. This amount is tax free when
passed onto the deceased person’s dependants. In
this context dependent means the spouse or
children under 18 of the deceased, or a person
who was financially dependant on the deceased, or
in an ‘interdependency relationship’ with the
deceased.
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.
Any part of the benefit that is assessable to the
deceased estate is included in the trust’s tax return
under ‘Other income’. The assessable part of the
benefit is deemed to be income to which no
beneficiary is presently entitled and is subject to
death benefit tax rates. Medicare levy is not payable.
Refer to Technical bulletin 37 - Superannuation death
benefits for more information.
Taxation during administration of
estate
Taxation of the deceased estate
After the date of death, the deceased estate may
receive income from various sources (see
Assessable income below). A trust tax return will
need to be lodged for the deceased estate if there
is tax payable on the income or capital gains or if
tax has been withheld from that income.
Tip: If the ultimate beneficiaries are nondependants (adult children), directing a
superannuation death benefit to the estate will
avoid the payment of Medicare levy.
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.
However the issues associated with the benefit
forming part of the estate should also be
considered eg potential challenges to Will,
payment may not be timely.
The net income of the deceased estate is taxed
either in the hands of:
• the beneficiaries who are presently entitled, or
Employment termination payments
• the executor.
The estate may receive a ‘death benefit
termination payment’ from the deceased’s
employer. The payment is taxed depending on
whether the ultimate beneficiary is a dependant or
non-dependant of the deceased and the amount of
the taxable component of the payment.
Assessable income
Any income derived after the date of death
belongs to the deceased estate. Income derived
after death may include:
The tax which applies to the taxable component is
as follows:
• salary and wages unpaid at the date of death
• bank interest
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Death benefit
termination
payment paid
to estate
Beneficiary is
dependant^
Beneficiary is
non-dependant
Taxable
component
up to
$160,000
Taxable
component
over $160,000
0%
Top marginal tax
rate
30%
Top marginal tax
rate
Tax related expenses
Expenses incurred by the deceased estate in
earning assessable income may be tax deductible.
For example:
• tax agent’s fees
• ongoing management fees paid to investment
advisers
^ Dependant means the spouse or children under
18 of the deceased, or a person who was
financially dependant on the deceased, or in an
‘interdependency relationship’ with the deceased.
• bank charges
• rental expenses for an investment property.
Any gifts made according to the terms of the Will
are not tax deductible unless the gift is made
under the Cultural Bequest Program. If deductible,
the deduction for the gift must be included in the
date of death return of the deceased and not in
the trust return.
The proportion of the payment that will benefit 1
or more dependants of the deceased is subject to
tax as if the trustee of the deceased estate was a
(single) dependant who received the payment.
The proportion of the payment that will benefit 1
or more non-dependants of the deceased is
subject to tax as if the trustee of the deceased
estate was a (single) non-dependant who received
the payment.
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.
Example
Extent to which
dependants or
non-dependants
will benefit from
payment
Amount of
death
benefit
termination
payment
Dependant/s
50%
$150,000
Tax payable
by trustee of
deceased
estate
Tax file number for the deceased estate
A tax file number is required to lodge a deceased
estate’s tax return. The executor will need to
complete an ATO form, ‘Tax file number application
for a deceased estate’, for a trust tax file number
and provide certain proof of identity documents.
$75,000 – Nil
$75,000 – 30%
Non-dependant/s
50%
1 Dependant
25%
3 Non-dependants
75%
$400,000
This trust tax file number may be quoted to
investment bodies for investments of the deceased
estate.
$100,000 – Nil
$300,000:
First $160,000
taxed at 30%
Balance
$140,000 taxed
at top marginal
rate
Paying tax on the income of the deceased
estate
There are many factors that determine who pays
the tax on the income derived by the deceased
estate and the applicable tax rate. They include
whether the:
The employer will not withhold tax from a death
benefit termination payment paid to a deceased
estate. However will issue a ‘PAYG payment
summary – employment termination payment’ for
the taxable component. Where the taxable
component is subject to tax, the amount is
included in the trust tax return.
• beneficiaries are presently entitled
• beneficiaries are under a legal disability
• the deceased estate is fully administered.
Death benefit termination payments received in
consequence of the same employment termination
count towards the cap, whether in the same
income year or not.
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presently entitled even though they may not have
actually received any income from the estate.
A summary of the different tax situations follows:
If the
income is an
amount to
which…
Then
A beneficiary
is presently
entitled
Determine
whether or
not the
beneficiary
is under a
legal
disability
No beneficiary
is presently
entitled
The
income is
assessed…
The tax
rates
which
apply
If the
beneficiary
is under a
legal
disability
To the
executor on
behalf of
the
beneficiary
Personal
income tax
rates apply
If the
beneficiary
is not
under a
legal
disability
To the
beneficiary
in their
personal
income tax
return
Personal
income tax
rates apply
The
executor is
assessed on
the income
Concessional
tax rates
apply for the
first 3 tax
returns of
the
deceased
estate
Generally, beneficiaries are not presently entitled
to the income of a deceased estate during the
estate’s administration. This is because the
debtors of the deceased person and anyone
challenging the Will may have a legal right to the
beneficiary's share of the income of the estate.
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 the executor that part of the net
income of the deceased estate will not be required
to either pay or provide for debts. In these
circumstances the executor may exercise their
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
expenses of the beneficiary being paid to a third
party.
A beneficiary can only be presently entitled to
income accrued after the date of 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:
While the deceased estate is being administered by
the executor they 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.
• minors (that is, under 18 years of age as at 30
June);
• bankrupt; or
An executor 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, if required.
• declared legally incapable because of managing
their own affairs.
When these people become presently entitled to
income of the deceased estate, the executor will
be assessed on their behalf. The tax rate payable
is the personal rate of tax.
An executor can distribute some of the income or
assets to beneficiaries if they are certain the
remainder of the deceased estate is sufficient to
cover any outstanding liabilities, for example, tax
and other expenses.
When is present entitlement determined?
The net income of the deceased estate and
whether any beneficiary is presently entitled are
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.
Meaning of present entitlement
Beneficiaries are presently entitled to the income
of a deceased estate if they have a claim or
interest in the income of the estate and no one
else has a legal claim to it. The beneficiary must
also be able to demand immediate payment of the
income. This means that beneficiaries can be
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First three income years
However, in the income year in which the deceased
estate is fully administered, the ATO 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:
For the first three tax returns, the deceased estate
income to which no beneficiary is presently
entitled is taxed at personal rates, with the benefit
of the full tax-free threshold. No Medicare levy is
payable.
Example
Income
derived in
the period
between…
Is assessed…
The deceased passed away on 1 August 2010.
The beginning
of the income
year and the
day
administration
was complete
In the hands of the executor.
The first tax year for the deceased estate will
cover the period 2 August 2010 to 30 June 2011.
The day
administration
was complete
and the end of
the financial
year
To the beneficiaries who are
presently entitled.
The second tax year will be from 1 July 2011 to 30
June 2012.
The third tax year will be from 1 July 2012 to 30
June 2013.
If the deceased estate earned taxable income of
$6,000 or less during those first three tax returns,
there is no tax payable.
Where beneficiaries are under a
legal disability, the executor will
be assessed on their behalf.
1st
tax
3rd tax
2nd tax
year
year
For an apportionment to take place:
• there must be evidence of the income derived
during these periods; and
Date of
death
1 August
2009
• the executor, or the beneficiaries, must request
it.
One exception is when the executor pays 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 as
they are presently entitled to that income.
Concessional tax
rates apply to the
estate
Taxed as
trust
Tip: It may be worthwhile to consider
maintaining the trust estate for the 3 year
concessionally taxed period as:
Lodging the deceased estate’s trust tax return
• the estate may have a lower rate of tax
compared to the beneficiaries
After an executor has determined whether the
beneficiaries are presently entitled and whether
they are under any legal disability at the end of
the financial year, they are then required to lodge
a trust tax return for the deceased estate if it is
liable to pay tax.
• it may be beneficial to realise capital gains
during this period.
This concessional period of three tax years at
personal tax rates, with the benefit of the full taxfree threshold cannot be extended beyond the end
of the ‘3rd tax year’.
If the deceased estate is paying tax on franked
dividends, the imputation credits need to be
claimed back through the trust tax return.
If the administration of the deceased estate is
completed in the same income year as the date of
death, the executor does not need to lodge a trust
tax return for the deceased estate if:
Tax rates for the deceased estate
Tax rates – no beneficiary presently entitled
• no beneficiary is presently entitled to any of the
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.
income of the deceased estate (they may
receive assets only), and
• the taxable income of the estate is below the
tax-free threshold of $6,000.
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Fourth income year and later
Medicare levy
For deceased estates with prolonged
administration that extend beyond the
concessionally taxed period, there are special
progressive trust tax rates that apply.
Medicare levy and Medicare levy surcharge are
also payable in the same way as if the income was
assessed to the beneficiary.
For the 2010/11 financial 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 - $37,000
$89 plus
15% of the excess over $594*
$37,001 - $80,000
$5,550 plus
30% of the excess over
$37,000
$80,001 $180,000
$18,450 plus
37% of the excess over
$80,000
$180,001 and over
$55,450 plus
45% of the excess over
$180,000
Tax offsets
An executor is also entitled to tax offsets to which
the beneficiary would be entitled. For example,
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.
The executor will need to include a statement with
the tax return that shows the type and amounts of
tax offsets claimed.
Tax rates – non-resident beneficiary
If the beneficiary is a non-resident for tax purposes,
the executor is liable to pay tax on the beneficiary’s
share of the trust income distributed at non-resident
tax rates. No Medicare levy is payable.
Interest and dividends are not included in the nonresident beneficiary's trust income. Instead, these
are taxed by having a non-resident withholding
tax withheld and paid to the ATO. The withholding
tax rate varies for different countries and between
interest and dividends. Fully franked dividends are
not subject to withholding tax.
* If taxable income exceeds $594, the entire
amount is taxed at 15%
No Medicare levy is payable.
Tax rates – beneficiary presently entitled and
not under a legal disability
Beneficiaries who are required to lodge
income tax returns
If the beneficiary is presently entitled and not
under a legal disability, hey are liable for tax in
their own tax returns.
Beneficiaries who are presently entitled may need to
lodge personal tax returns and disclose their
distributions from the estate. Accordingly, they need
to know certain information about their entitlement.
For example, if an executor makes 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 personal tax rate.
The executor of the estate should provide all
beneficiaries who are presently entitled with the
following information:
• their share of trust income that they were
Tax rates - beneficiary presently entitled but
presently entitled to
under a legal disability
• the amount of their entitlement that was
applied for their benefit
If the beneficiary is presently entitled, but under a
legal disability, the executor is liable to pay tax on
their behalf. The executor is assessed separately
for each beneficiary in this category at personal
income tax rates.
• the amount that is assessable to them
• their share of imputation credits associated with
any dividends that may be in the trust distribution.
Normally, unearned income of minors is subject to
tax at higher rates and lower tax-free threshold.
However, for distributions from a deceased estate,
personal tax rates apply.
Beneficiaries presently entitled but under a legal
disability also need to know:
• the amount of tax the executor has paid on
their behalf. A beneficiary is entitled to receive
a tax credit for this tax to avoid taxing the same
amount twice.
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Non-resident beneficiaries will also need to know:
Presently entitled and under legal disability
• the amount of interest in their distribution and
The executor is required to pay tax on behalf of
beneficiaries who are presently entitled to the
income of the deceased estate but under a legal
disability (eg. under 18 years old).
the withholding tax paid
• the amount of unfranked dividends in their
distribution and the withholding tax paid
If the income from the deceased estate is the
beneficiary’s only source of income for the year,
they do not need to lodge a tax return.
• the amount of franked dividends in their
distribution
• the amount of tax the executor has paid on
Beneficiaries with other income need to lodge a
tax return that includes the income distribution
from the deceased estate. However, they will be
entitled to a credit for the tax payable by the
executor on their behalf.
their behalf.
Tax obligations of beneficiaries
There may be some tax obligations for beneficiaries
depending on the nature of any distribution they
may receive. The executor should provide details of
trust distributions to the beneficiaries.
Overseas deceased estate
The rules for resident beneficiaries are the same
regardless of whether the deceased estate is in
Australia or overseas. A beneficiary may be
entitled to a foreign tax credit if the income
distributed from an overseas deceased estate has
been subject to foreign tax.
Corpus (capital) distribution
No tax is payable by the estate or beneficiary on
the distribution of corpus. This is the capital
amount or income that has already been subject
to tax to the deceased estate. For example, the
capital in a bank account.
Franked dividends
Resident beneficiaries are entitled to franking
credits attached to any income distributions from a
deceased estate.
If the distribution is a transfer of an asset, there
may be capital gains tax consequences for the
beneficiary.
Capital gains tax
Income distribution
When a person dies, the assets that make up their
estate can:
How distributions of income of the deceased estate
are taxed depend on whether the beneficiaries are
presently entitled to the income.
• pass directly to a beneficiary, or
• pass directly to the executor who may dispose
Income used to make payments on behalf of a
beneficiary (eg. to pay for the beneficiary’s
expenses) is income to which that beneficiary is
presently entitled.
of the assets or pass them to the beneficiary.
For CGT purposes the distinction between when an
asset ‘passes’ and when an asset is ‘disposed’ of
by the executor to a beneficiary is important. An
asset passes to a beneficiary if the asset is:
Presently entitled and under no legal disability
Resident beneficiaries are personally liable to pay
tax on distributions of income, if they are presently
entitled and not under any legal disability.
• specifically bequeathed or devised to the
beneficiary in the Will; or
• if there is no specific bequest or devise but the
This means the income distribution will need to be
included in their personal tax return and they will
pay tax at their personal tax rates. The income is
assessable in the year they became presently
entitled to the income, not in the year the amount
is received.
executor distributes an asset in specie to a
beneficiary in or towards satisfaction of that
beneficiary’s entitlement in the Will (eg. share
of residual estate) the distribution is considered
to pass to a beneficiary; or
• transferred under family provision legislation or
intestacy laws.
For example, if a beneficiary was presently entitled
to the income of the estate on 1 June 2010, they
are personally assessable on that amount in the
year ended 30 June 2010 even though the amount
may be received after that date in the following
tax year.
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may need to be taken into account when making
an equal distribution to beneficiaries.
Capital gain or loss on death is disregarded
There is a special rule which allows any capital
gain or capital loss made on a post 19 September
1985 (post CGT) asset to be disregarded if, when
a person dies, an asset they owned passes:
CGT payable when an executor disposes of
asset
• directly to the executor or to a beneficiary, or
• from the executor to a beneficiary.
Generally CGT is payable on post -CGT assets
which are disposed of by the executor. Disposal
includes:
Exceptions to this rule
• selling an asset to a third party (not a
A capital gain or capital loss is not disregarded if a
post-CGT asset owned at the time of death passes
from the deceased to a:
• selling an asset to a beneficiary named in the
beneficiary named in the Will or entitled under
the laws of intestacy)
Will under a power of sale.
• tax-advantaged entity eg charity or
• Example. Deceased provided a right to purchase
superannuation fund; or
a property which forms part of the estate. Even
though the property may be transferred to a
beneficiary under the terms of the Will,
ownership passes to the beneficiary as a
purchaser not as a beneficiary. Therefore it is a
disposal of the asset by the executor to the
beneficiary. Exercise of option and purchase of
asset is treated as a single transaction i.e.
exercise of the option is not considered to be a
disposal of option for CGT purposes.
• to a non-resident.
In these cases, a CGT event is taken to have
happened in relation to the asset just before the
person died. These capital gains and losses should
be taken into account in the deceased person’s
‘date of death return’.
However, any capital gain or capital loss from a
testamentary gift of property can be disregarded if:
• the gift is made under the Cultural Bequests
Program (which applies to certain gifts of
property – not land or buildings – to a library,
museum or art gallery), or
Where the executor disposes of an asset, the
capital gain must be included in the estate (trust)
tax return.
• the gift is made to a deductible gift recipient or
Pre CGT assets are deemed to be acquired by the
executor at market value at the date of death. The
disposal of pre-CGT assets by the executor will
generally not trigger CGT unless the market value
of the asset increases from the date of death to
the date of disposal.
a registered political party and the gift would
have been income tax deductible if it had not
been a testamentary gift.
CGT payable when a beneficiary disposes of
asset
Please see the Appendix for a summary of the
above CGT consequences.
A beneficiary receiving an asset inherits the cost
base of the deceased for a Post CGT asset (plus
any subsequent expenses). If a Pre CGT asset, the
cost base becomes the market value of the asset
at the date of death.
Small business CGT concessions
An individual’s LPR or beneficiaries can utilise the
small business CGT concessions even when the
LPR does not continue to run the business
themselves. If the deceased would have qualified
for the concessions, the LPR can apply them to the
degree the deceased could have provided the
asset was disposed of within 2 years of the
deceased’s death. The tax commissioner has
discretion to extend the 2 year period.
A capital gain may accrue or a capital loss may be
incurred by the beneficiary on any later disposal of
the asset by the beneficiary.
Beneficiary receives asset versus asset sold
in the estate
An issue to consider is whether a beneficiary
should receive the assets (in specie) or whether
the assets should be sold in the estate and cash
given to the beneficiary.
If taken in specie no CGT is payable by the estate
but is payable by beneficiary when they later sell
the asset. This could cause problems for the
beneficiary. Any CGT liability relating to an asset
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Stamp duties
Each state and territory provides a stamp duty exemption or concession (ie levy a nominal duty of $10 or
$20) where the deceased’s dutiable property is transferred to the executor or by the executor to a trustee or
beneficiary under a Will or intestacy law. Where assets are transferred to a beneficiary under a power of sale
contained in the Will, a stamp duty exemption or concession may or may not apply depending on each
jurisdiction.
Each state or territory’s provisions should be considered closely as they are expressed and administered
differently. Following is a general guideline to how the provisions vary between jurisdictions.
State or territory
Stamp duty provisions
Legislative references
NSW, VIC, ACT, TAS
Exemption applies to a transfer of dutiable
property by the executor made under or in
conformity with, the trusts contained in the Will
of the deceased person if the transfer is not
made for valuable consideration.
s63 Duties Act 1997 (NSW)
QLD
Exemption applies where the transfer gives
effect to a distribution in the estate of the
deceased person.
s124 Duties Act 2001 (QLD)
WA
Transfer made to a beneficiary from a person in
a fiduciary capacity shall be charged with
nominal duty.
s73AA(1)(b) Stamp Act 1921 (WA)
SA
Exemption applies where the transfer is in
pursuance of the Will of a deceased person.
s71(5)(h) Stamp Duties Act 1923
NT
Conveyance made by trustee to a beneficiary
where the trustee acquired the dutiable
property by virtue of the operation of a
testamentary instrument.
s9A(c) Sch 2 Stamp Duty Act 1978
(NT)
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s42 Duties Act 2000 (Vic)
Section 69 Duties Act 1999 (ACT)
s47 Duties Act 2001 (Tas)
Appendix
The following table summarises the CGT consequences where a person died on or after 20 September 1985 and
an asset of the deceased's estate is transferred to a beneficiary of the estate.
WHERE ASSET TRANSFERRED BY EXECUTOR TO BENEFICIARY
Date
acquired
by
executor
Deemed acquisition by
executor
Whether
disposal
by
executor
Whether CGT
applies to
transfer by LPR
to beneficiary
Date
acquired by
beneficiary
Whether CGT
applies to
subsequent
disposal by
beneficiary
Asset
specifically
given to
beneficiary by
Will or court
order
Date of
death
If asset was acquired by
deceased before
20/9/85, market value.
Otherwise, cost base,
indexed cost base or
reduced cost base (as
case may require) to
deceased at date of
death.
NO
NO
Date of
death
YES
Asset sold to
beneficiary
under a
power of sale
Date of
death
If asset was acquired by
deceased before
20/9/85, market value.
Otherwise, cost base,
indexed cost base or
reduced cost base (as
case may require) to
deceased at date of
death.
YES
YES
Date of sale
contract
YES
Asset
appropriated
in or toward
satisfaction of
the
beneficiary's
entitlement
Date of
death
If asset was acquired by
deceased before
20/9/85, market value.
Otherwise, cost base,
indexed cost base or
reduced cost base (as
case may require) to
deceased at date of
death.
NO
NO
Date of
death
YES
Asset bought
by grantee of
testamentary
option who
exercised the
option
Date of
death
If asset was acquired by
deceased before
20/9/85, market value.
Otherwise, cost base,
indexed cost base or
reduced cost base (as
case may require) to
deceased at date of
death.
YES
YES
Date of sale
contract
YES
This Technical Bulletin has been produced by OnePath Technical Services and is intended for the use of financial advisers
only. It is current as at the date of publication but may be subject to change. This publication has been prepared
without taking into account a potential investor's objectives, financial situation or needs. Before making a
recommendation based on this publication, consider its appropriateness based on the client’s objectives, financial
situation and needs. OnePath Technical Services is not a registered tax agent under the Tax Agent Services Act 2009.
Your client should refer to a registered tax agent before relying on information in this publication that may impact their
tax obligations, liabilities or entitlements.
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