Australia Deceased Estates Tax Guide

Australian tax rules for deceased estates. The guide covers: the executor's responsibilities — the 'executor' (the 'legal personal representative' of the 'deceased person') is 'responsible for the tax affairs' of the 'deceased person' and the 'deceased estate'; the 'executor must': (i) 'lodge the final tax return' of the 'deceased person' for the 'income earned up to the date of the death', (ii) 'lodge the estate tax returns' for the 'income earned by the estate after the death', (iii) 'pay the tax on behalf of the deceased and the estate', (iv) 'obtain the grant of probate' (the 'probate' is the 'legal authority to administer the estate'); the final tax return of the deceased person — the 'final tax return' (the 'deceased person's tax return') is 'lodged for the 'income year in which the death occurred' — the 'return covers the 'income from the 1 July to the date of the death''; the 'income' in the 'final return' includes: the 'salary and the wages', the 'business income', the 'investment income', the 'rental income', and the 'capital gains from the assets disposed of by the executor'; the 'tax offsets and the deductions' are 'prorated' for the 'period up to the death'; the taxation of the deceased estate income — the 'deceased estate' is the 'separate taxpayer' for the 'income earned after the death'; the 'estate income' is 'taxed at the 'progressive tax rates' (the 'individual tax rates') BUT the 'estate has the 'tax-free threshold' of $18,200 (the 'same as the individual'); the 'estate income' includes: the 'interest', the 'dividends', the 'rental income', and the 'capital gains' from the 'estate assets'; the 'estate tax return' (the 'trust tax return' for the 'deceased estate') must be 'lodged each year' until the 'estate is 'distributed' or 'administered''; the beneficiaries and the distributions — the 'beneficiaries' who 'receive the distributions from the estate' are 'taxed on the estate income' if the 'income is 'presently entitled' to the 'beneficiary'; the 'beneficiary includes the 'estate income' in the 'personal tax return' at the 'marginal rate'; the 'estate income that is NOT 'distributed to the beneficiary' is 'taxed in the estate'; the 'tax-free distributions' (the 'capital' or the 'principal' of the estate) are 'tax-free' for the 'beneficiary' (the 'inheritance is NOT the 'assessable income'); the CGT on the deceased estate — the 'CGT on the death of the person' — the 'CGT does NOT apply on the death of the person' (the 'CGT rollover' under the 'Section 128-15 of the ITAA 1997' — the 'assets pass to the beneficiaries at the 'deceased's cost base''); the 'beneficiary' 'acquires the asset at the 'deceased's cost base' (the 'full CGT rollover' for the 'estate assets'); the 'CGT on the sale of the estate assets by the executor' — the 'sale of the assets by the executor' may 'trigger the CGT' (the 'CGT event A1' on the 'disposal by the executor').

Executor Responsibilities

Final return: The 'executor lodges the deceased's final tax return' for the 'income up to the date of the death'.
Estate returns: The 'executor lodges the estate tax return each year' for the 'post-death income'.
Grant of probate: The 'probate' is 'required to administer the estate'.

For the inheritance and the estate tax rules, see our Inheritance & Estate Tax Guide →.

Estate Income & Beneficiaries

Estate tax rate: The 'estate income is taxed at the 'progressive rates' with the '$18,200 tax-free threshold'.
Beneficiary taxed on distributions: The 'income distributed to the beneficiary' is 'taxed at the beneficiary's marginal rate'.
Capital distributions tax-free: The 'inheritance of the capital or the principal' is 'tax-free'.

For the CGT rollover and the cost base on the death, see our Capital Gains Tax Guide →.