There are no death taxes under Australian Law, but when a person dies, some of their income or capital transactions may be taxed.
Taxation Of Income Received Before Death
The executor of the deceased estate is required to lodge the final tax return (and any outstanding tax returns) for the deceased person.
If the executor determines this final tax return is not necessary, they will need to lodge a “Non-lodgment advice form” with the ATO.
Nitschke Nancarrow can easily prepare this “not necessary” request electronically on your behalf.
Taxation Of Pre-Death Income
Generally, one will be able to utilise the full tax-free threshold for the final tax return of the deceased person. The Medicare levy and accompanying surcharge may be payable.
Taxation During Administration Of Estate
A trust tax return will need to be lodged for the deceased estate every income year if there is tax payable on the income or capital gains of the estate. The net income of the estate is taxed either when it reaches the beneficiaries or while it remains with the executor.
What Happens To Assets When The Owner Dies?
Special capital gains tax rules apply to the transfer of any CGT assets to or from the estate of a deceased person.
When a person dies, the assets in their estate will either pass to the beneficiaries directly or through a legal representative.
This legal representative can be either the named executor of the deceased estate or a court-appointed administrator if there is no will.
Likewise, the beneficiaries are those entitled to the assets of a deceased estate, either through the will or as a result of the laws of intestacy.
Three Year Rule
Generally, the deceased estate of an individual is able to be taxed as an individual would be for three years following the death of the deceased.
This means that they can receive tax distributions for their trust or alternative trust for 3 years. This is to give the executors appropriate time to administer the estate. It is important to remember that the remainder of the first year that the deceased dies counts as the first year. And then the 2 full financial years after that comprise the remainder of the 3 years.
Inheriting A Dwelling
If you inherit a deceased person’s dwelling or are trustee to their estate, you may be exempt or partially exempt when a capital gains tax (CGT) event happens to it (for example, if you sell it). It depends on when the deceased person acquired the property, what the property was used for, and when the deceased died.
How Nitschke Nancarrow Can Help
• Preparing the final tax return for the deceased
• Working with the administrator of the estate to apply for Trust Estate TFN and prepare the trust estate tax return while the estate is administered
• Providing tax advice on the transfer of property and super funds to the estate or directly to beneficiaries in the most tax effective manner
• Activate the bunding death nomination in the Super Fund
It’s crucial to seek personalised advice about Deceased Estates. Nitschke Nancarrow specialises in accounting, tax and financial advice for deceased estates. Contact us now for a no obligations discussion about your needs