The Government is proud to boast “we don’t have death taxes in Australia” and many executors and family members of the deceased think this means there is no tax to be paid when someone passes away. Sadly this is not true, there are some tax obligations that as executor you need to take care of and this is quite important as if you do not then you as executor may find yourself liable for any tax and penalties.
This is just a brief article and the laws involved are quite complicated so please do get some personal advice if you are administering an Estate.
Lodging the final return – The deceased needs to lodge a tax return up till the date of death, the tax rules and tax free thresholds are generally as for a living person. Just like when alive there are circumstances where a final return may not be needed, if this is the case then the executors or Legal Personal Representative (LPR) should notify the Tax Office.
Notify the ATO of the death – The LPR should notify the ATO
Tax Returns and Affairs of the Estate – From the date of death onwards the estate is a legal entity in itself with its own tax obligations. It is the obligation of the executor or LPR to ensure that any returns required are lodged on time and tax paid. This tax is to be paid out of the estate prior to distribution of the estate as any shortfall in tax can be collected directly from the LPR. Again if no return is needed then the LPR needs to make sure to keep accurate records of the estate and notify the ATO that a return is not required.