Guide to Managing Tax for a Deceased Estate

The Australian Taxation Office (ATO) has recently updated its guidance on how to manage deceased estates from a tax perspective with the aim to provide easy to understand tax advice for managing a deceased estate.

The ATO understands that when a person dies, the last thing the family and friends are thinking about is tax. However, after some time has passed, relatives will naturally start to turn their minds to what else needs to be done, for example:

• there may be tax returns to be lodged

• property may need to be sold – which can take time and result in additional tax returns

• income or assets may need to be transferred to the intended beneficiaries to finalise the estate.

To make things as easy as possible for your clients, the ATO has developed a checklist that outlines all the steps that might need to be taken. The checklist includes phone numbers, links to more information, and explanations for more complex scenarios. The checklist includes steps on the following information: 1. Look after yourself This is the most important thing. This step provides phone numbers for some confidential counselling services.

2. Pause tax correspondence The ATO can stop sending tax correspondence to the deceased person when they are advised of the death. This step explains how to advise the ATO.

3. Managing the deceased's financial affairs This step will help your clients establish who should administer the estate. Administering an estate can take time and comes with several responsibilities. If there is an executor named in a will, they will generally manage the deceased's financial affairs. If there is no executor, the next of kin may choose to take on the responsibility.

4. Get help if you need it This step provides information about who can assist with both tax and non-tax aspects of administering a deceased estate.

5. Grant of probate or letters of administration This step will help your clients determine if they need one of these court-issued documents, required to be considered the authorised legal personal representative (LPR) by the ATO. The LPR has:

• full authority to manage the deceased's tax affairs

• unrestricted access to ATO-held information and assets of the estate.

Clients managing a small estate may not need to apply for a grant of probate or letters of administration. However, there will be some legal limitations on what information the ATO can provide or what assets can be released without them.

6. Notify the ATO The ATO can be notified who will manage the deceased estate's tax affairs unofficially by phone, or officially by submitting an official notification of death. This step links to information on how to submit an official notification of death.

7. Manage any business tax obligations This step includes information to help identify whether the deceased person's tax affairs included carrying on a business. There may be outstanding business activity statements to lodge and tax to pay. Further advice from a legal practitioner or registered tax agent may be required.

8. Lodge a final tax return for the deceased A final 'date of death' tax return for the deceased person may need to be lodged. This covers the income earned in the financial year in which the person died, up to their date of death. This step links to how to obtain a deceased person’s tax information from the ATO and how to lodge the tax return.

9. Lodge tax returns for the deceased estate When someone dies, their assets are held in trust by their estate until they can be distributed. The deceased estate is a separate entity to the deceased individual. The estate may receive income from these assets such as rental income from a property, or dividends from shares. In this case trust tax returns may need to be lodged and tax paid from the estate. This step links to further information on lodging trust tax returns.

10. Finalise tax affairs Before the final distribution of the deceased's property to the beneficiaries is made all tax obligations need to be completed. This step links to information about finalising the estate, and the obligations of the legal personal representative.

Share this information with your client families by directing them to the ATO’s checklist, available at ato.gov.au/ IndividualsDeceasedEstateChecklist.