How to Lodge a Tax Return for a Deceased Estate in Australia

Which tax return does a deceased estate need?

Two different tax periods can exist when someone dies. The deceased person's own tax affairs cover income earned up to the date of death. The deceased estate is treated separately for income earned after death while the estate is being administered.

The date-of-death tax return covers the deceased person's income from the beginning of the income year to their date of death. The deceased estate's first tax period starts the day after death and ends on the next 30 June.

For example, if a person dies on 4 March, their date-of-death return can cover 1 July to 4 March. The estate's first income year then runs from 5 March to 30 June.

This distinction matters because interest, rent, dividends and other income arising after death may belong in the estate's trust return rather than the deceased person's individual return.

When must the estate lodge a trust tax return?

The ATO applies special lodgment rules during the first three income years of a deceased estate.

For each of the first 3 income years, a trust tax return must be lodged if any of these conditions applies:

• the estate's net income is more than the tax-free threshold for individuals;
• a beneficiary is presently entitled to any of the estate's income at the end of the income year; or
• a beneficiary of the estate is not an Australian tax resident.

From income year 4 onward, the estate must lodge a trust tax return if it earns any income, including capital gains.

An estate can also lodge a return voluntarily when one is not otherwise required. The ATO gives claiming franking credits on dividends paid to the estate as an example.

What counts as the first income year?

The first income year begins on the day after the person's death and ends on the following 30 June. The next estate income year begins on 1 July.

This means the first estate tax period can be much shorter than 12 months. The first three income years are determined using those tax periods rather than by counting three full calendar years from the death.

Is a deceased estate return the same as a testamentary trust return?

No. The ATO distinguishes a deceased estate from a testamentary trust. A deceased estate exists while the legal personal representative administers and distributes the estate. A testamentary trust is a separate trust established under a will, codicil, court order or intestacy arrangements and can continue after administration of the deceased estate has finished.

Do not continue using the deceased estate's TFN for a separate testamentary trust. They are separate entities for tax purposes.

Who normally lodges the estate return?

The person who usually manages the tax affairs is the authorised legal personal representative (LPR).

For full ATO authority, this is generally:

• an executor who has obtained a grant of probate from a Supreme Court; or
• another person who has obtained letters of administration appointing them as administrator.

The ATO says a trust tax return can be lodged after the death has been notified and the person managing the tax affairs has been entered on its records.

If someone who is not an authorised LPR lodges an estate return, the ATO states that it will assess the return and determine the appropriate treatment under the law and its internal policies. Access to information and refunds is more restricted for someone who is not the authorised LPR.

Notify the ATO before managing the estate's tax affairs

The ATO provides a Notification of a deceased person process to officially record the death and identify who will manage the estate.

An authorised legal personal representative can use the notification process to have their contact details recorded. The ATO's current notification form identifies an executor with grant of probate or a court-appointed administrator as examples of a legal personal representative.

The ATO provides an online notification route that involves presenting supporting documents at a participating Australia Post outlet. A paper Notification of a deceased person form can also be used with the required certified supporting documents.

Does the deceased estate need its own TFN?

Yes, if the estate needs to lodge a trust tax return, it needs a separate trust TFN.

The estate is treated separately from the deceased individual after death, so you do not use the deceased person's personal TFN as the estate's TFN.

If the estate is not running a business, the ATO currently provides two main application routes:

• apply for the trust TFN online through the Australian Business Register (ABR); or
• complete the ATO's Tax file number – application for a deceased estate form.

The ATO states that generally the authorised LPR or their appointed representative applies for the estate TFN.

Does the estate also need an ABN?

Not simply because it is a deceased estate. However, if the authorised LPR continues the deceased person's business while finalising the estate, the estate needs a new ABN as well as a trust TFN.

The deceased person's existing business ABN cannot be used for the estate. The authorised LPR can apply for the estate's TFN and ABN together. In the online application, the ATO instructs applicants to select Company, Partnership, Trust or other organisation and then Trust / Deceased estate.

What income goes in the deceased estate tax return?

The trust return reports income earned by the estate after the person's death. Depending on the estate, this can include amounts such as:

• interest earned on estate bank accounts;
• rent from estate property;
• share dividends and associated franking credits;
• capital gains arising from relevant sales or transfers of estate assets;
• certain superannuation lump sums; and
• death benefit employment termination payments.

The ATO specifically instructs trustees to include all income the deceased estate has earned since death, subject to the tax rules applying to particular assets and payments.

When does a capital gain belong in the estate return?

The treatment depends on why and how an estate asset is transferred.

If an asset passes to a beneficiary under the will or rules of succession, the ATO generally says not to include a capital gain or loss for that transfer in the estate trust return. Special treatment applies where the beneficiary is a foreign resident, charity or superannuation fund.

If the estate instead sells or transfers an asset for another reason, any resulting capital gain or loss may need to be reported in the estate trust return, including where the recipient happens to be a beneficiary.

The deceased person's unused net capital losses do not transfer to the estate and cannot be used to offset the estate's net capital gains.

What goes in the deceased person's date-of-death return?

The date-of-death return is an individual tax return for the deceased person. It deals with their tax position up to death rather than income subsequently earned by the estate.

The ATO describes it as covering the period from the beginning of the income year to the person's date of death. The authorised legal personal representative generally lodges it when required.

A date-of-death return can be lodged using the paper individual tax return. If the legal personal representative appoints a registered tax agent, the agent can prepare and lodge the return electronically.

If a date-of-death return is not required, the ATO provides for a non-lodgment advice instead. This is separate from deciding whether the deceased estate itself needs a trust return.

How do you lodge the estate's trust tax return?

The ATO states that a deceased estate return can be lodged using the applicable Trust tax return. The accompanying trust tax return instructions contain a specific appendix for trustees of deceased estates.

If you are the authorised LPR and appoint a registered tax agent, the agent can prepare and lodge the estate trust return online.

The ATO's public deceased-estate guidance does not provide a direct self-service myTax lodgment route for an executor to electronically lodge the estate's trust return. The self-lodgment route described by the ATO is the paper Trust tax return, while an appointed tax agent can lodge electronically.

If you already use myTax for your own individual return, do not confuse that with the estate's trust-return process. Helpydo's guide to lodging an individual tax return through myTax covers personal individual returns, not deceased estate trust returns.

Do you need to lodge a return every year?

Potentially. A deceased estate can remain under administration across several income years, and the lodgment test must be considered for each relevant year.

During the first three estate income years, apply the special ATO tests for net income, presently entitled beneficiaries and non-resident beneficiaries. From the fourth income year onward, a trust return is required whenever the estate earns any income, including capital gains.

The ATO notes that finalising an estate typically takes 6 to 12 months but can take longer. This is an estate-administration estimate, not a guaranteed tax-return processing time.

When do deceased estate tax returns stop?

Trust tax returns may continue to be required until the deceased estate is finalised. Once administration is complete and the estate has been distributed, make sure all required tax obligations have been dealt with.

The ATO's deceased-estate example shows the legal personal representative lodging the required return for the income year in which the estate was finalised and then contacting the ATO to advise that the estate would lodge no further returns.

If assets remain in a separate testamentary trust after estate administration finishes, that trust has its own tax affairs and should not simply continue using the deceased estate's return and TFN.

Is there a filing fee or standard processing time?

The ATO does not charge an application fee to obtain an estate TFN or a filing fee to lodge the tax return. You may separately incur fees if you engage a registered tax agent, accountant, solicitor or other professional.

The ATO does not publish one standard processing-time commitment specifically for deceased estate trust tax returns in its current deceased-estate lodgment guidance. Do not use the ATO's 6-to-12-month estimate for finalising an estate as a tax-return processing estimate; it refers to estate administration generally.

Common mistakes to avoid

• Do not combine the deceased person's pre-death income and the estate's post-death income into one return.
• Do not use the deceased person's TFN as the estate's trust TFN.
• Do not assume an estate automatically needs a return every year during the first three income years. Apply the ATO's specific lodgment tests.
• Do not assume a low-income estate can skip the return if a beneficiary is presently entitled to estate income or a beneficiary is not an Australian tax resident.
• Do not assume the first estate income year starts on 1 July. It starts the day after death and ends on the next 30 June.
• Do not reuse the deceased person's business ABN if the estate continues the business. A new estate ABN is required.
• Do not treat a continuing testamentary trust as if it were the same entity as the deceased estate.
• Do not transfer the deceased person's unused net capital losses to the estate; the ATO states that they cannot offset estate capital gains.
• Do not assume an inheritance itself is subject to an Australian inheritance tax. The ATO states that Australia has no inheritance taxes, although income, capital gains and particular estate transactions can create tax obligations.

Other tax procedures that may be relevant

If the estate has significant debts and cannot meet its obligations, that issue is distinct from preparing the trust tax return. Helpydo separately explains Temporary Debt Protection in Australia; note that eligibility for that personal insolvency process should not be assumed to extend to a deceased estate.

If you discover that an earlier individual tax return lodged before the person's death needs correction, the process is also separate from the estate trust return. See the guide to amending an Australian tax return after lodgment, while following the ATO's deceased-estate authority rules when acting for a deceased taxpayer.