When a deceased estate has to file an income tax

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?

Written by Olga Galacho

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