If you have been named as an executor under a Will or if you are the administrator of a deceased estate, part of your responsibilities in this role is to manage the deceased estate’s tax concerns.

Some of the many issues that can arise include:

Superannuation

When a person dies their superannuation is paid to their beneficiaries either directly  or via their estate. Generally speaking:

  • death benefits paid to dependents (spouses and minor children) are tax free; and
  • the taxation to be paid on lump benefits (paid to non-dependents) and death benefit income streams depend on a number of factors.

An executor will need to assess the manner in which a superannuation benefit is paid and the tax consequences that result.

Capital gains tax

When the assets of a deceased estate are distributed there are special rules that apply to allow any capital gain or loss made on a CGT asset to be disregarded if the asset passes to the executor or to a beneficiary.  These rules however do not apply if an executor sells an asset (ie real estate or shares) and then distributes the proceeds of that sale, to the beneficiaries.  In this case, CGT liabilities may apply for the Estate and tax advice should be sought.

Date of death tax returns for the deceased

An executor or administrator of a deceased estate may need to lodge a final tax return on behalf of the deceased and then lodge annual tax returns for the deceased estate for each year that the deceased estate is in existence. Tax returns may be required where there is tax withheld from the income earned by the deceased person or by the estate. Where taxable income is earned by the Estate:

  • and such income exceeds the tax free threshold ($18,200 tax free) a tax return is required to be lodged;
  • if such income does not exceed the tax free threshold, a tax return may still be required or a Non Lodgement Advice can be lodged with the Australian Taxation Office.