Deceased Estate Tax Returns: Help for Executors
A person's tax doesn't end when they die. As executor or administrator, you're responsible for any returns they hadn't lodged, a final "date-of-death" return, and tax returns for the estate while it earns income. We prepare and lodge them all, work out any capital gains tax before property or shares are sold, and deal with the ATO for you, from our Sydney office or by phone and email anywhere in Australia.
Which tax returns does a deceased estate need?
Usually up to four kinds:
- Earlier years' returns the person hadn't lodged.
- A date-of-death return for their income from 1 July to the date of death. If no return is needed, you send the ATO a non-lodgment advice instead.
- Trust tax returns for the estate for income it earns after the death, such as rent, interest or dividends, until the assets are distributed.
- Beneficiaries' own returns, once income or assets are in their names.
An executor's tax checklist, step by step
If the person was several years behind, see our late tax returns service.
- 01
Tell the ATO about the death
Use the ATO's online form, then confirm your identity at a participating Australia Post outlet, or post the paper form with certified copies. You'll need the death certificate or the grant of probate or letters of administration. Updating the records can take up to 28 days. If you don't have the documents yet, phone the ATO and it will pause the person's tax letters. To be recorded as the authorised representative, the ATO generally needs probate or letters of administration.
- 02
Get access to the person's tax records
Once you're recorded, the ATO can give you a data package with the person's tax return information for the last 3 income years, any debts and their super accounts. If you appoint us as the estate's tax agent, we can see their records directly and check for unlodged years, refunds owing and debts.
- 03
Lodge outstanding returns and the date-of-death return
The date-of-death return covers 1 July to the date of death. You can't lodge it in myTax or the person's myGov account: it's either a paper return or lodged online by a tax agent you've appointed. It's generally due by 31 October after the end of that financial year, or later if a registered tax agent lodges it. If no return is needed, send a non-lodgment advice and write "DECEASED" and the date of death as the reason.
- 04
Register the estate and lodge its trust returns
Income the estate earns after the death, such as rent from a property waiting to be sold or interest on a bank account, belongs to the estate. If a trust return is needed, the estate needs its own tax file number (applied for through the Australian Business Register). Each income year runs from 1 July to 30 June, except the first, which starts the day after the death.
- 05
Work out capital gains tax before selling or transferring assets
Check the 2-year rule for the home and the cost base of every property and share parcel before anything is listed or transferred (see below).
- 06
Pay the tax, then distribute
Keep enough back to cover tax owed by the person and the estate before you make final distributions, or you may be personally liable (see below).
How the estate's income is taxed
For the estate's first 3 income years, its income is generally taxed at the same rates as an individual's, including the $18,200 tax-free threshold. The first income year starts the day after the death and ends on the next 30 June, so this concession can run out only a little over 2 years after the death. From the fourth year, higher rates apply and there's a much smaller tax-free amount. The ATO says the 3-year period can't be extended. See the deceased estate 3-year rule. In the first 3 years, the estate generally needs a trust return if its net income is above the tax-free threshold, a beneficiary is presently entitled to income at 30 June, or a beneficiary is a foreign resident. From year 4, it needs a return if it earns any income, including capital gains. It can also lodge when it doesn't have to, for example to claim a refund of franking credits on dividends. If a beneficiary is presently entitled to the estate's income, they generally include their share in their own tax return.
Capital gains tax: the 2-year rule and inherited assets
There's no inheritance tax in Australia, and assets generally pass from the person to the estate or a beneficiary without CGT. Tax usually arises later, when an asset is sold. The deceased's home: the 2-year rule. A sale is generally fully exempt from CGT if settlement happens within 2 years of the death and either:
- the person bought the home before 20 September 1985, or
- it was their main residence just before they died and wasn't being used to produce income then.
It doesn't matter whether the estate or a beneficiary lived in it or rented it out during those 2 years. The exemption isn't available if the person was a foreign resident for more than 6 years at the time of death. If the sale is delayed by things outside your control, such as a contested will, the ATO's safe harbour (PCG 2019/5) can allow up to 18 more months if its conditions are met, and you can ask the Commissioner for a longer extension. After 2 years, or for other assets, the cost base depends on the asset's history. It's generally the market value at the date of death for pre-1985 assets and for the person's home. For investments bought on or after 20 September 1985, it's the deceased's original cost base, and their ownership period counts towards the 12 months needed for the 50% discount. A valuation at the date of death is worth getting early. From 1 July 2027, growth after that date is indexed rather than discounted (see our capital gains tax page). Watch out for: a post-1985 asset passing to a foreign resident beneficiary (unless it's Australian real property or another taxable Australian asset), a charity or a super fund. The gain up to the date of death can then be taxed in the date-of-death return. More detail: CGT on inherited property.
Unused losses lapse at death
If the person had carried-forward tax losses or capital losses, they can be used in the date-of-death return (capital losses only against capital gains). Anything left over lapses. It can't be passed to the estate or the beneficiaries, so it can't shelter a gain the estate makes later when it sells shares or property.
Your personal liability as executor
As executor you must lodge any returns the person was required to lodge, and pay their tax debts out of the estate. You aren't personally liable for more than the value of the estate assets you control. But if you distribute assets while you know of an ATO claim, or a possible one, you can be personally liable for the tax that's left unpaid. Beneficiaries generally can't be pursued for assets already distributed, unless there was fraud or evasion. For simpler estates, the ATO's PCG 2018/4 gives a safe harbour. If you've lodged all the person's outstanding returns (or advised that none were needed) and the ATO hasn't told you within 6 months that it intends to review their affairs, you can distribute without that risk. Broadly, the estate must have been worth under $10 million at death and hold mainly Australian property, cash and super death benefits, and other conditions apply. The safe harbour doesn't cover the estate's own tax after the death. We'll tell you whether the estate qualifies and how much to hold back.
What to bring
Start with what you have. We'll help you find the rest.
- Death certificate, and the will and grant of probate or letters of administration if you have them
- The person's tax file number, if you know it, and recent notices of assessment
- Bank, term deposit and share statements, including dividend statements
- Rental property statements and loan statements
- Purchase records for property and shares (or the dates they were bought)
- Any valuations at the date of death
- Super fund and pension or Centrelink payment details
- Details of any business, trust or self-managed super fund the person was involved in
What it costs
We agree a fixed fee with you before we start. Fees for administering the estate can usually be paid from the estate. See us at our Chippendale office, or work with us by phone, video and email from anywhere in Australia.
Working with executors, wherever you are
Many executors are family members doing this for the first time, often while grieving and working. We explain each step in plain terms, tell you before anything is sold what the tax will be, and deal with the ATO so you don't have to. Executors interstate or overseas can work with us entirely by phone and email.
Related services
Capital gains tax
Capital gains tax worked out before property or shares are sold.
Capital gains tax
Late tax returns
Earlier years' returns the person hadn't lodged, several years at once if needed.
Late tax returns
Our Chippendale office
See us in Chippendale, or work with us by phone, video and email from anywhere in Australia.
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Free guides
Related guides
Plain-English answers from our registered tax agents. Free to read, no sign-up.
Deceased Estates
The deceased estate 3-year rule
Not a deadline: estate income gets individual tax rates and the $18,200 threshold for 3 income years. What changes in year 4, and the 2-year CGT rule.
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Capital Gains Tax
Capital gains tax on inherited property
Inherited home? It's usually CGT-free if it was the deceased's home, wasn't earning income and the sale settles within 2 years. Cost base rules and examples.
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Capital Gains Tax
The main residence exemption
Find out how the Capital Gains Tax Main Residence Exemption can benefit you when selling your home or investment property.
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Frequently asked questions
The person's date-of-death return is needed if they would have had to lodge for that part of the year (otherwise you send a non-lodgment advice). The estate itself needs a trust return in its first 3 income years if its net income is over the tax-free threshold, a beneficiary is presently entitled to income or a beneficiary is a foreign resident. From year 4, it needs one if it earns any income.
It's the person's final individual tax return, covering 1 July to the date of death. It's lodged on paper or by a registered tax agent appointed by the executor or administrator, not through myTax. Income after the death, such as rent or interest, goes in the estate's trust return instead.
Usually not when assets pass to the estate or a beneficiary. CGT generally arises when an asset is sold. The deceased's home is generally exempt if settlement happens within 2 years of the death and the conditions are met. Other assets take a cost base that depends on when the person bought them. Passing assets to a foreign resident beneficiary, a charity or a super fund can trigger CGT in the date-of-death return.
Generally by 31 October after the end of the financial year in which the person died, or later if it is lodged through a registered tax agent.
There is no inheritance tax in Australia. Beneficiaries may pay tax on income they receive from the estate, and capital gains tax may apply later when they sell inherited assets such as property or shares.
Yes. We lodge any outstanding prior-year returns as part of finalising the person's tax affairs.
No. Many executors work with us by phone and email, including executors who live interstate or overseas.
No. myTax and myGov can only be used by the account holder to lodge their own return. You can lodge on the paper individual tax return, or appoint a registered tax agent, who can lodge online once you're recorded with the ATO as the person managing the estate. You'll need to have notified the ATO of the death first.
You can notify the ATO of the death with a death certificate, and phone them to pause the person's tax correspondence. To be recorded as the authorised legal personal representative, who can see the person's records and lodge for them, the ATO generally needs a grant of probate or letters of administration. If the estate won't need probate, talk to us about the options.
They can be used in the date-of-death return: tax losses against that year's income, and capital losses only against capital gains. Any amount left over lapses at death. It can't be transferred to the estate or to beneficiaries, so it won't reduce tax on gains the estate makes later.
Only up to the value of the estate assets you control, and generally only if you distribute assets while aware of an ATO claim or possible claim. For simpler estates, the ATO's PCG 2018/4 safe harbour protects you if all returns are lodged and the ATO hasn't said within 6 months that it will review them. Hold back enough to cover tax before final distribution.
The full exemption may still apply if the delay was outside your control. The ATO's safe harbour allows up to 18 extra months if its conditions are met, and you can apply for a longer extension. Otherwise CGT generally applies to the growth since the date of death, if the home was the person's main residence, so a valuation at the date of death is important.
For its first 3 income years, the estate's income is taxed at individual rates with the $18,200 tax-free threshold. The first year ends on the 30 June after the death, so this can run out a little over 2 years after the person died. After that, higher rates apply, and the ATO says the period can't be extended.