Accounting for Deceased Estates
When a person dies, an executor (also known as an administrator or legal personal representative) is appointed to administer the estate of the deceased person.
A deceased estate is held in trust from date of the death of the person until the transfer of the assets to the beneficiaries specified in their will.
There are income tax, capital gains tax and superannuation issues to consider for deceased estates that can include cash in bank accounts, real estate assets, shares and personal possessions as stated in the will.
The executors responsibilities are:
Tax Responsibilities
- lodging a final return (and any outstanding prior year returns) for the deceased person
- lodging any trust tax returns for the deceased estate
- providing beneficiaries with the information they need to include distributions in their own tax returns and, in certain cases, paying tax on their behalf.
Capital gains tax (CGT) implications of Death
Tax may be payable on certain income or capital transactions that arise as a consequence of a person’s death.
When the assets of a deceased estate are distributed, a special rule applies that allows any capital gain or loss made on a CGT asset to be disregarded if the asset passes:
- to the executor
- to a beneficiary, or
- from the executor to a beneficiary.
However, if an executor sells a CGT asset of the deceased estate and then distributes the proceeds to the beneficiaries, the sale is subject to the normal CGT rules and a tax liability may arise. We have a great deal of experience calculating Capital Gains Tax implications for Estates, so please contact us to discuss this further.
Superannuation death benefits
In most cases, when a person dies, their superannuation fund will pay their remaining super to their nominated beneficiary as either a withdrawal or in some cases a pension, which is called a “super death benefit”. If there are no binding death nominations, then the trustee of the super fund will decide how the benefit will be paid. Depending upon the trust deed of the superannuation fund, and rules and regulations operating for superannuation, the trustee may pay it to the deceased estate, then the executor will deal with it accordingly.
Individual Resident tax rates 2020–21
Taxable income Tax on this income
0 – $18,200 Nil
$18,201 – $45,000 19 cents for each $1 over $18,200
$45,001 – $120,000 $5,092 plus 32.5 cents for each $1 over $45,000
$120,001 – $180,000 $29,467 plus 37 cents for each $1 over $120,000
$180,001 and over $51,667 plus 45 cents for each $1 over $180,000
