When a deceased estate has to file an income tax

How to know if an estate needs to lodge an income tax return.

When death is not a tax deduction

It has been said that nothing is more certain than death and taxes. Unfortunately, even in death, taxes are not something from which one can escape. If you are taking care of the worldly matters of a deceased loved one, it is important to find out if an income tax return needs to be lodged on the estate’s behalf.

Not all estates will require a return to be lodged, but if the following apply, then you can bet that the Australian Taxation Office (ATO) will be waiting for some paperwork, regardless of whether the deceased was retired or not. To understand the obligations, talk to an accountant if the deceased:

  • was entitled to the private health insurance rebate but the correct entitlement was not claimed
  • was 60 years old or older and received a superannuation lump sum that included an untaxed element or a superannuation lump sum death benefit paid to you as a non-dependant
  • is entitled to a distribution from a trust or had an interest in a partnership and the trust or partnership carried on a business of primary production
  • received income from dividends or distributions exceeding $18,200 with franking credits attached
  • made personal superannuation contributions that exceeded the non-concessional (after-tax) contributions cap.

There are other circumstances that require a return to be lodged on behalf of an estate. For more information visit the ATO site.

If a tax return is not required, complete the Non-lodgment advice form and send it to the ATO. If one is required, see Completing individual information on a tax return.

And it isn’t just taxes that must be paid by an estate which owes them; any unpaid debts a deceased may have accrued also need to be repaid by the estate, even if it means selling assets to do so.

Sadly, those to whom the deceased bequeathed money or assets have to line up behind any creditors who are still owed money by the deceased.

Have you ever been an executor for someone’s will? Did you know that income tax returns have to be filed on behalf of a deceased estate?

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    COMMENTS

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    MICK
    29th Jun 2018
    10:28am
    You have it a bit mixed up Olga. The saying is 'the ONLY certainty in life is death and taxes'. Not optional.
    Anonymous
    29th Jun 2018
    11:52am
    And Shorten taxing the average Aussie into the poorhouse
    Anonymous
    29th Jun 2018
    12:58pm
    That idiot Shorten keeps putting his foot in it but you do have to remember he was Gillards assistant so has not had a good background
    HarrysOpinion
    29th Jun 2018
    3:20pm
    Shorten has to go, Publicly he's ineffective as a leader of opposition and that does matter when it comes to voters.
    Jim
    29th Jun 2018
    4:52pm
    What has any of this got to do with Bill Shorten, it's a story about taxation after the death of someone, can we try to stop turning every article into a political debate about the merits of either political parties, you know it's quite possible that some people might get a benefit from the articles discussed here, or am I just dreaming?
    niemakawa
    29th Jun 2018
    5:04pm
    Jim, it is all about politics. Politicians are the first to interfere in social matters that do not concern them. This is life today unfortunately. Who sets the tax rates ? certainly not the public. As for merit neither Lib nor Lab display any.
    Rae
    1st Jul 2018
    8:19am
    You guys do realise Shorten isn't the PM, the ALP isn't in government and how dumb keeping blaming a not PM and a not government is sounding?
    Anonymous
    3rd Jul 2018
    8:06am
    Raphael will take any opportunity to slam Labor and promote the cause of his beloved Lieberal Party. Why? They are no different. Of course Shorten is a vile worm, and MT is not the tiniest bit better. They are all disgusting creeps, and all have the same agenda. They are working as a tag team. Anyone who thinks differently is a blind fool.

    As for tax on estates - it's a fact of life and I don't really have a major issue with it except when government stuff-ups make it payable or compel an executor to waste hundreds of hours proving it's NOT payable (See my post below!)

    If the government discovered, after a death, that it had overpaid or undertaxed the deceased, it would demand repayment. So why should it escape obligation to pay up if the reverse occurs and a significant underpayment is discovered? A bit rich to try to tax money that should have been paid years before and would not have been taxable if paid when it was due!
    OnlyDaughter
    29th Jun 2018
    12:01pm
    We need to be grateful in Australia that we do not have the dreaded Inheritance Tax, once known as Death Duties. It was repealed in Australia around 1979. This insidious tax is still alive and kicking in the UK. It has a tax-free threshold of £325,000 and everything after that is taxed at 40% in the £. A relative of mine died leaving an estate of just under £600,000 ($1.2million in around terms Australian) and the Inheritance Tax on that is just under £102,000 ($204,000 Aus round terms) or overall around 20% of the total value of the Estate. Thanks goodness neither of the two major Australian political parties of thieves has proposed the reintroduction of this disgusting rort.
    Old Geezer
    29th Jun 2018
    12:05pm
    We got caught with that tax too when my partner's uncle died in the UK. There was so many entitled to a share that the tax man got the biggest chunk of it. My partner got about $10,000.
    TREBOR
    29th Jun 2018
    12:10pm
    Don't speak too loudly - they might hear you.
    Rosret
    29th Jun 2018
    12:26pm
    Oh yes, Trebor. What is the Greens stand point?
    It was such a cruel tax.
    However even in Australia, if someone ever puts you as the person to handle their estate don't see it as a compliment.
    It is a very difficult procedure and if there are young children and custody issues in the mix it all compounds.
    The one piece of advice a lawyer gave me and I let it rattle around in my brain many times. If you are executor of a Will you are not Father Christmas. Families can and will take legal action against you if you get it wrong.
    niemakawa
    29th Jun 2018
    3:09pm
    Surely any tax imposition on an estate is a "death" duty.
    Old Geezer
    29th Jun 2018
    12:02pm
    The hardest thing I had to do with a deceased estate was all the paperwork involved in telling them some one had died. Once I did all the paperwork I had to spend an hour and a half at the post office signing even more forms.
    Rosret
    29th Jun 2018
    12:27pm
    Yes.
    TREBOR
    29th Jun 2018
    12:04pm
    Hmm - so the average Joe Bloggs has nothing to consider.... OK...

    To get $18,200 - the tax free threshold - in dividends you need somewhere around $300-$400K in shares... don't forget your franking that is pre-paid tax, and is thus to be included in gross income before taxation determination.

    All the rest - well... not for your average line worker, even super to any significant extent and extra payments etc... Jo and Joe Bloggs are barely keeping their heads above water.

    Nothing to see here people.
    Rosret
    29th Jun 2018
    12:29pm
    You would be surprised, Trebor. Paperwork that you never dreamed of appears before you to check and sign and woe betide if you get it wrong.
    mogo51
    29th Jun 2018
    12:55pm
    My mother has just died leaving a very meagre benefit but the process will take 3 months, as she was intestate at time of death, due to long term dementia. Bureaucracy is very much alive in this country. This process cost over $3000 so the vultures keep circling even after death.
    Ahjay
    29th Jun 2018
    2:58pm
    A friend of mine recently lost her son who died intestate. His affairs were being managed by the Public Trustee, who was required to send 32% to the ATO as all his money was in superannuation and he had no dependents Not happy.


    Everyone should be made aware of the taxation on an estate if the deceased has money in superannuation.
    TREBOR
    29th Jun 2018
    3:07pm
    Every time you turn a rock on super or retirement etc, there is a slime trail leading directly to Canberra.
    Anonymous
    29th Jun 2018
    3:09pm
    Slimey Shorten certainly leaves a dirty smelly trail
    niemakawa
    29th Jun 2018
    3:10pm
    TREBOR "all roads lead to Canbera"
    Anonymous
    3rd Jul 2018
    8:01am
    Yes. Most financial advisers recommend that you drain your super account before death if at all possible. Some super funds may be tax free, but it's worth checking and planning to take any taxable money out before you die.
    niemakawa
    29th Jun 2018
    2:50pm
    Well funds have to be found for the mass migration from the third world . This is a dictate from the UN. Think Australia is an independent and sovereign country, well think again. Australians wake up if you love your country and never ever vote for Lib/Lab /Greens or their associated parties. Do nothing if you are happy with this migration policy.

    29th Jun 2018
    3:08pm
    Flip flop Slimy Shorten now backs the corporate tax cuts
    Will say anything for votes - how do you trust such a person
    niemakawa
    29th Jun 2018
    3:14pm
    If by any chance he flukes a win at the next GE he will change his tune. Politicians as a group should never be trusted. Extreme vigilence by the public is paramount.
    Anonymous
    29th Jun 2018
    4:05pm
    Yes at the moment Billy boy is digging his own grave, everything he has backflipped on he will do plus his new taxes will be;
    A nice big carbon tax to effect all business and then of course this will be passed onto us.
    He will cut capital gains discount
    Negative gearing will go
    Capital gains tax will be levied on sale of your own house.
    GST will be increased to 15% and then perhaps 20%
    Death taxes will be introduced
    Individual taxes will be increased.
    Medibank levy will be doubled.
    Superannuation taxes will be doubled for each employee.
    A new tax will be levied to cover the cost of boat people he will let into the country.
    For pensioners your own house will be included in the assets test
    If you want to vote for this fool be very careful as it will hurt every Australian
    niemakawa
    29th Jun 2018
    4:22pm
    Robbo, Yes these adjustments to taxation in Australian are all part of Labor policy (hidden agenda) . Libs are not far behind on that score either. Australians will be continuoulsy shafted by both these parties. Both are tied to the dictates of the UN and as such Australian is beholden to that dysfunctional organisation which is responsible for all the woes in Western society. The biggest problem though is the inherent complacency of the majority of Australian voters who continue to vote Lab/Lib. These parties are holding the ace cards knowing full well that most voters don't give a damn about the long term prosperity of this once great Nation. Nothing will change and Australia will become just like many Western European countries where white people will be threatened with extinction.
    Rae
    1st Jul 2018
    8:26am
    You can't trust any Party out there. They slam self funded retirees for a couple of billion here and a couple of billion there then hand over $65 billion in tax cuts, and spend tens of billions on weaponry.
    The attack on retirees was pure ideology and a despicable betrayal.A pox on all their Houses.
    MD
    29th Jun 2018
    7:56pm
    "Have you ever been an executor for someone’s will? Did you know that income tax returns have to be filed on behalf of a deceased estate?"

    Gobsmacked to say the least, would somebody be kind enough to explain how so many of these answers/comments have little or no bearing to subject.
    What or why is it that prompts so many, regardless of subject, to immediately launch into political pontification? Pompous lot of policy wonks that profess to have answers for all/every matter politic which ultimately amounts to little more than pissin in the wind.

    Yes (the family, obviously me included) have experienced involvement, two siblings and myself fulfilling the collective role as executors. An interesting point relative to subject, some two years after Dad died we were contacted by DVA advising us of an overpayment to Dad from some five years earlier. This had come about due to our parents downsizing and whilst a few months passed between selling and repurchasing the sale funds were held in their account, earning interest. Although the estate had been settled quite some time prior this it had no bearing whatsoever - the claw back stood. Needless to say we paid up, be fools not to. All's fair in death and taxes after all eh?
    niemakawa
    29th Jun 2018
    9:09pm
    The article relates to income tax. Levels of income tax are set by Polticians so of course discourse along these lines are quite acceptable. Aint life grand, when politicians are interfering in all aspects of our lives!! The big Brother syndrome, no less.There are far too many taxes in Australia and this article is exposing an element of that.
    TREBOR
    30th Jun 2018
    8:44am
    I think the phrase is that politicians and public service (top end) are gaming the system to suit themselves all the time.

    Aye - there lies the rub....
    Eddy
    29th Jun 2018
    11:47pm
    Why should death cancel out an individuals tax obligations. If tax is payable then it should be paid.
    Charlie
    30th Jun 2018
    5:49am
    When the person you left a little money to, finds out it will cost them more than they get, as they are the executor of your tiny will.
    Olga
    2nd Jul 2018
    9:18am
    Thanks Mick: you are right, but I paraphrased it a little to fit with the syntax in the sentence.

    3rd Jul 2018
    7:57am
    Had to file 8 years of returns for an estate for which I was executor because I discovered, 2 years before the death, that the deceased had Comsuper pension entitlements that were never paid. I helped prepare a claim because the money was needed to pay for a better standard of aged care accommodation, but the payment didn't eventuate until after the death. I then spent hundreds of hours disputing the ATO's assessment. After a string of appeals were denied and I was told the decision was final and thousands were owed in taxes, an ATO employee phoned me at 5:15pm on a Friday to tell me he'd just realized the ATO computer was wrong and he'd gone back over the file manually and found I was right all the time and no tax was owing. Well, logically that SHOULD have been the situation, since the income had not been received when due because ''Comsuper forgot to pay it and forgot to advise the person of their entitlements'', but claimed interest was not payable because ''it's not government policy'' to pay interest on wrongly withheld pension amounts. The ATO claimed it was taxable because it was all received in one year. I argued that if received when due, no tax would be payable. I won the battle for the ungrateful beneficiaries and got them tens of thousands extra - including, eventually, some small compensation for the delayed payment. Cost me a fortunate in time, phone calls and postage and what I got in thanks was vicious attack and nastiness. I'll NEVER agree to be executor of a will again!
    SuziJ
    24th Jul 2018
    8:15am
    No super, no savings, no life insurance (can't afford it). No tax return for the past 11 years. The only things that I do own are a 12 year old car and household furniture. How can the Tax Man get into the conversation? He'll find a way.