Are you one of the lucky few who have inherited money? If so, congratulations! While receiving an inheritance can be an exciting and life-changing event, it also comes with certain responsibilities, including the need to file a tax return.
After the date of death, all assets and income from the deceased are provided to the beneficiaries. However, before the will and trust are administered, any income earned by the trust is taxed by lodging a trust tax return for the estate. This income can be distributed to all the beneficiaries, after probate, in some circumstances, maybe after all tax returns are lodged.
As the executor of the testamentary trust, it's your responsibility to determine whether you need to lodge a trust tax return for the deceased. Even if the other beneficiaries have already received their share of the assets and income, you still need to file the return if the estate earned income while the assets were being distributed. Once all assets and income are in the beneficiaries' names, they can lodge their own individual tax return and declare their income from the inheritance.
It's important to note that the date of transfer of assets to the beneficiaries triggers the capital gains tax asset's date of purchase. This means that if you sell any assets after this date, you may be liable for capital gains tax.
If you wind up your deceased estate and none of the beneficiaries are entitled to any more money, income, or assets, or if the taxable income of the estate is under the tax-free threshold of $18,200 for the 2023 income tax year, you may not need to lodge a tax return. However, we recommend that you lodge the trust tax return even if it's under $18,200 to avoid receiving repeated requests from the Australian Tax Office.
At Australia Wide Tax Solutions, we understand that dealing with the tax implications of a deceased estate can be overwhelming. That's why we offer expert advice and support to help you navigate the process. Contact us today to schedule an appointment and get a quote for winding up the testamentary trust for your deceased estate.