To make it easier to finalise deceased estates, there have been some improvements in the ATO’s guidance for managing the tax affairs of deceased estates.
First of all, there is now a telephone option to notify the ATO that a taxpayer has passed away. You can phone 13 28 61 to give the ATO an “unofficial” notification of a death, which will stop mail being issued until the official notification of death is received. The official process to notify the ATO can be done online or by mail or in person (see these options here).
The ATO has also provided a direct channel for public trustees to consult with its experts via its Complex issues resolution service (see more here).
Importantly, the ATO has put together a checklist to assist practitioners in covering all the relevant decisions (which is reproduced below, or follow this link for the ATO checklist online).
Taking care of a deceased estate: The basics
After a person dies, and the usual arrangements are completed, there will come a time when other matters, such as tax and superannuation issues, must be looked after. The person who takes on the responsibility for administering a deceased estate is commonly referred to as the executor, but could also be known as an administrator or a legal personal representative.
One of the necessary steps in the process, and generally the first action to take, is to obtain probate. Basically, this is a court-issued document that confirms that the person whose affairs are being looked at is in fact deceased — and therefore cannot hold bank accounts, shares, property and so on — and that the person appointed executor in their will is legally entitled to wind up said affairs.
One of the central matters to take care of is the final tax return. The ATO refers to this particular return as a “date of death tax return”, which is lodged on behalf of the deceased. The ATO used to insist that these must be lodged on a paper return (which is no longer the case), but otherwise all the other assessment conditions apply — that is, the same tax rates, income thresholds, withholding conditions, lodging requirements and so on.
The date of death tax return will be the last document to require the deceased’s particular individual tax file number (TFN). Upon completion, this TFN will not be used again
There are a few other differences to remember when completing this return. The executor will need to label the return as being for a “deceased estate”, sign the tax return on behalf of the deceased, and show the name of the taxpayer as “The legal representative of <their name>, deceased”. Also, answer “no” at the question “Will you need to lodge an Australian tax return in the future?”.
Assessable income earned or derived, and deductible expenses incurred, up to the date of death should be included in the return. But income earned and deductible expenses incurred after the date of death (for example from investments and such) will need to be dealt with in the deceased estate’s trust return — not in this final individual tax return. The treatment of capital gains or losses would be dealt with in a similar way (here’s some ATO guidance on this). Readmore
