Deceased Estates and the Tax Office

Finalising the tax affairs of a Deceased Estate is an area that we all too often see overlooked by executors and administrators. There are a number of obligations that executors and administrators must comply with in this regard to avoid getting into trouble with the Australian Taxation Office (ATO). This post will discuss the most important of these.

Notifying the ATO that the deceased has died.

The first thing that must be done is to notify the ATO that the deceased has passed away. This may be done informally first by phoning the ATO and will stop mail and notifications being sent while the ATO awaits formal notification.

Once you have received the deceased’s death certificate, the ATO can be formally notified of their death. There are a few ways of doing this. Please get in touch if you need further information.

Authorised persons

The ATO limits the amount of information they provide and may refuse to transfer amounts owing to the deceased or the estate unless you are an “authorised person”. An authorised person is an executor with a grant of probate or an administrator with Letters of Administration. You may notify the ATO that you are an authorised person when providing official notification of death or later if necessary.

TIP: Even if a grant of probate or letters of administration is not necessary, it will greatly assist you in dealing with, and obtaining information from the ATO.

Obtaining tax information for the deceased estate

If you are an authorised person you may request a “Deceased Estate Data Package” from the ATO. If you have a solicitor or tax agent assisting you with administering the estate, they will also be able to do this on your behalf.

The Deceased Estate Data Package will include the following information (if it exists):

• Tax return information for the last three years.
• Income and investment data for the last three years.
• Extracts of notices of assessment for the last three years.
• Statement of account.
• Details of outstanding debts.
• Details of any known superannuation accounts.
• Payroll data for the current year.

TIP: Not only will this information assist you with your dealings with the ATO and deciding with tax returns need to be filed, it may also help identify unknown assets or superannuation benefits.

Date of death tax return

You may be required to loge a “date of death tax return” for the deceased person. Some reasons for this include if the deceased earned income beyond the tax-free threshold or had tax withheld from any income. An accountant or tax agent will be able to help determine whether a date of death tax return is required. If a tax return is required they will also be able to prepare it on your behalf. The date of death tax return is the final individual tax return for the deceased person.

In addition to the date of death tax return, if the deceased was required to lodge tax returns for previous years but didn’t you as the executor or administrator will need to prepare and lodge the missing tax returns on their behalf. Again, an accountant or tax agent will be able to assist you with this.

Filing deceased estate tax returns

A deceased estate is a trust for tax purposes and is legally a separate tax payer. As such, you as the executor or administrator will need to decide whether the estate is required to lodge a tax return for each financial year that the administration continues. There are a number of circumstances in which estate tax returns will be required and depend on the individual circumstances of the estate and what stage the administration is at. A solicitor, accountant or tax agent will be able to help you decide whether the estate is required to lodge a tax return for a particular financial year.

If the estate is required to lodge a tax return you will need to apply to the ATO for a Tax File Number for the it. Again, a solicitor, accountant or tax agent will be able to help assist with this.

Trusts established by the will

Sometimes a will may establish one or more trusts of which you will become the trustee. The most common of these is where an inheritance is to be held on trust until a beneficiary reaches a certain age, such as 18. In some cases, more complex trusts such as testamentary discretionary trusts and special disability trusts may be established by the will. In all of these cases it is possible that tax returns will need to be lodged for each of the trusts, sometimes for many years to come. If you are the executor of a will that establishes a trust, we strongly recommend obtaining legal and accounting advice to ensure you comply with your obligations as an executor.