If the deceased person has ever lodged a tax return and has a Tax File Number, the Australian Tax Office (ATO) will need to be notified of the death using either a paper form or the online ATO Notification of a Deceased Person form.

You will need to make an interview appointment at an Australia Post branch within 30 days of completing the form and take the following documentation:

• Certified copy of the will 
• Letters of Administration or Grant of Probate

There is currently no inheritance tax in Australia; however, some taxes may apply to the estate.

Please seek professional taxation advice to help you understand the tax implications and types of tax that may apply to your personal circumstances, including:

• capital gains tax
• foreign tax implications

Advise beneficiaries to seek their own taxation advice to ensure they understand the tax implications that may impact how they choose to take their inheritance.

Transfer of deceased estate assets

Varying tax rules apply according to how estate funds and assets are transferred and who pays these taxes may also differ.

Income tax is the most common form of tax, payable by anyone who is required to pay tax on earnings of any kind. If the estate is generating income in the deceased's sole name during estate administration (ie bank account interest, rent, dividends) then income tax applies. 

Company tax will need to be paid by the new owner of the deceased person's business if they ran a company that is sold or gifted to a beneficiary.

Captial gains tax is paid on the profit from the sale of certain assets (real estate or shares). General capital gains tax doesn't apply when you inherit an asset; however may apply when the asset is sold. This process can get quite complicated and it is recommended to consult an accountant or financial representative.

Tax on superannuation may apply if the deceased's superannuation benefit is paid to a non-dependent person (someone other than a spouse, former spouse, child under 18 or other dependent). Beneficiaries can be taxed up to 32% on the taxable component. 

Executors and administrators need to understand the tax liabilities of the deceased, as these must be paid before the residue of the estate is distributed to beneficiaries.

You can contact the ATO on 13 28 61 to determine when the last tax return was lodged.

If you establish that previous tax returns were not completed and the deceased earned income from a salary, investments, returns on shares or earned after selling an asset over the tax-free threshold, you will need to prepare and lodge any outstanding returns on the deceased's behalf.

Tax returns completed on behalf of a deceased person must be completed using ATO paper forms, not online.

Once you have established all individual tax returns have been completed and taxes have been paid you need to complete a ‘date of death tax return’.

If the deceased earned income from a salary, investments, returns on shares or earned money after selling an asset over the tax-free threshold you will need to prepare and submit a final tax return on behalf of the deceased person for the financial year in which the person passed away.

If you establish a ‘date of death tax return’ is not due you should complete a non-lodgement advice form.

You can find more information about date of death tax returns on the ATO website.

If capital gains were generated from the sale of assets or income generated while the deceased estate is being administered a deceased estate tax return must be submitted for all financial years until the estate is finalised.

You will be required to submit a tax return if the estate income is over the tax-free threshold from any of the following:

• interest on ‘estate of late’ bank accounts
• investment returns such as dividends on shares
• income from an investment property or letting the deceased person’s home
• income from a trust as a beneficiary
• income from capital gains after the sale of an appreciating asset
• income from dividends
• money from a business
• any other form of income as defined by the ATO

You will need to obtain a tax assesment, which will identify how much tax is payable from the estate. Once you know this amount you can choose to pay it immediately, or set aside that amount before assets are distributed to beneficiaries.

Deceased estate tax returns are due for lodgement by 31 October of that financial year, for the financial year ending 30 June (as per the usual individual tax return lodgement deadline). 

If you are worried you will not be able to complete and submit the tax return before the deadline you can apply for a deferral through the ATO or your tax accountant.

If you have not yet received probate or letters of administration you will not be able to complete a tax return on behalf of the deceased (or the estate) and should seek a deferral. 

You can get further information about tax returns and taxation matters on 13 28 61 or visit the ATO website HERE.