Deceased Estate Tax Returns in Australia: Who Lodges Them and How

Managing the finances of someone who has died is rarely straightforward. Between probate, asset distribution, family dynamics and grief, dealing with the tax office is the last thing most executors feel equipped to handle. Yet tax obligations do not pause for bereavement, and the consequences of getting things wrong can fall personally on the executor.

This guide explains what tax returns are required after a death in Australia, who is responsible for lodging them, how the process works in practice, and what beneficiaries need to understand about whether they will pay tax on what they inherit.

 
Does a Deceased Person's Tax Return Always Need to Be Lodged?

Not always, but in most cases where the deceased was earning income or lodging returns before they died, the answer is yes.

A final tax return, known formally as the date of death tax return, is required if any of the following applied to the deceased person in the financial year in which they died:
  

• Their taxable income exceeded the tax-free threshold ($18,200)
• Tax was withheld from their income during the year, including from bank interest or share dividends
• They had been lodging tax returns in previous years
• They had outstanding tax returns from prior years that had never been lodged

 
Even if none of these conditions are met, the executor still has an obligation to notify the ATO of the death. If a return is not required, a Non-Lodgement Advice form must be sent to the ATO with the reason written as 'DECEASED' followed by the date of death. Failing to do either is not an option.

 
Who Is Responsible for Lodging the Return?

The Legal Personal Representative

In Australian tax law, the person responsible for managing the tax affairs of a deceased person is called the Legal Personal Representative, or LPR. This is almost always the executor named in the will, or the court-appointed administrator if there is no will or the named executor cannot act.

The LPR must register with the ATO as the person managing the deceased's tax affairs before they can access tax records, lodge returns, or receive any refund that may be owed. This registration is a prerequisite, not an optional step, and it happens through the ATO's notification process for deceased estates.

What If There Is No Will?

When someone dies without a will, the situation is described as intestate. In these circumstances, no executor exists because no will has appointed one. A family member or other interested party can apply to the relevant state Supreme Court for letters of administration, which grants them the authority to act as administrator of the estate and take on the LPR role for tax purposes.

If no one applies for letters of administration within six months of the death, the ATO may raise an assessment of the estate's tax-related liabilities and seek to recover any tax owing independently. The practical message for family members managing an estate without a will is that the process needs to begin promptly, even without the clarity that a will provides.

Can an Executor Be Held Personally Liable?

Yes, and this is one of the most important things an executor needs to understand before distributing any assets to beneficiaries.

If the executor distributes the estate's assets to beneficiaries before ensuring that all tax obligations have been paid or provided for, they can become personally liable for any tax debt that remains. This liability is not limited to what the executor received as part of the estate. It extends to their personal assets if the distributed assets are no longer recoverable.

The correct sequence is: receive the notice of assessment, settle any tax owing from the estate's funds, then distribute what remains to beneficiaries. Skipping or reversing those steps creates personal financial risk for the executor.

 
The Two Types of Tax Returns a Deceased Estate May Need

Most people who encounter this process for the first time are surprised to discover that there are potentially two different tax returns involved, covering two different periods and submitted under two different taxpayer identities. Understanding the distinction is fundamental to getting the lodgement right.

 
The Date of Death Tax Return (Final Return)

The date of death tax return is lodged under the deceased person's own Tax File Number and covers the period from 1 July of the year they died up to the date of death.

It uses the standard individual tax return paper form (not the online lodgement system, which can only be used by the living taxpayer holding the account). The form must be marked 'DECEASED ESTATE' at the top and signed by the LPR on behalf of the deceased.

This return includes all income the deceased person earned up to their death: salary, bank interest, dividends, rental income, and any capital gains events that occurred before the date of death. Losses that cannot be deducted in this return cannot be carried forward by the estate. They lapse at death.

There is an important point about deductions: the executor's costs in preparing the deceased's tax return, including any fees paid to a tax agent, can be claimed as a deduction in the date of death return even if those costs are incurred after the death itself.

 
The Trust Tax Return for the Deceased Estate

Once the date of death passes, the deceased estate becomes, for tax purposes, a trust. Any income the estate earns after the date of death is reported in a separate trust tax return, lodged under the estate's own Tax File Number, not the deceased's.

This includes income from assets that have not yet been distributed to beneficiaries: ongoing bank interest, rental income from a property still held in the estate, dividends from shares, and any capital gains arising from assets the estate sells during administration.

For the first three income years of the estate, a trust tax return is required if the estate's net income exceeds the tax-free threshold, if a beneficiary is presently entitled to income at year end, or if any beneficiary is not an Australian tax resident. From year four onwards, a return is required if the estate earns any income at all, regardless of amount.

An estate that holds a rental property or investment portfolio while probate and distribution is finalised can remain open and lodging trust returns for several years. This is more common than most executors expect when they first take on the role.

 
Does the Estate Need Its Own TFN?

Yes, if a trust tax return will be required. The deceased's personal TFN covers only the date of death return. The estate, treated as a trust, needs its own Tax File Number to lodge trust returns and operate accounts in the estate's name. The LPR can apply for a trust TFN through the Australian Business Register. If the estate is also continuing the deceased's business during administration, a new ABN is also needed because the deceased's existing ABN cannot be transferred.

 
Step-by-Step: How to Lodge a Deceased Estate Tax Return

Step	Action
1	Notify the ATO of the death and register as the person managing the deceased's tax affairs. This unlocks access to the deceased's tax records and is required before any return can be lodged.
2	Check for outstanding prior year returns. The ATO can advise what, if anything, has not been lodged. These must also be brought up to date as part of the estate's compliance.
3	Gather all income records for the period from 1 July up to the date of death: income statements, bank statements, dividend notices, rental summaries, and any records of asset sales.
4	Determine whether the estate will earn income after death. If yes, apply for a trust TFN for the estate through the Australian Business Register before the trust return falls due.
5	Lodge the date of death return using the paper individual tax return form, marked 'DECEASED ESTATE'. A registered tax agent can lodge this electronically on your behalf.
6	Wait for the notice of assessment. Any tax owing must be paid from the estate's assets before distribution to beneficiaries. Any refund is paid to the LPR.
7	Lodge trust tax returns annually until the estate is finalised, reporting all post-death estate income. Advise the ATO when no further returns will be required.

 
Documents You Need Before Lodging

Gathering records before starting the lodgement process saves significant time and reduces the risk of errors or incomplete information. The key documents fall into two categories: identity and authority, and financial records.

Identity and Authority Documents

• A certified copy of the will (or letters of administration if there is no will)
• Grant of probate from the relevant state Supreme Court, if required
• The deceased's Tax File Number (available from their personal papers, prior tax returns, or from the ATO once the LPR is registered)
• The LPR's own identification documents for ATO registration

 
Financial Records for the Date of Death Return

• Income statements or payment summaries from employers for the period up to the date of death
• Bank statements showing interest earned during the relevant period
• Dividend statements from share holdings
• Rental income and expense records if investment property was held
• Records of any asset sales, including contracts and purchase documents needed to calculate the cost base for capital gains purposes
• Any records of deductions: work-related expenses, income protection insurance premiums, tax agent fees

 
If some records cannot be found, the LPR can access the deceased's tax information through the ATO once registered as an authorised representative.

 
Capital Gains Tax and the Deceased Estate

Capital gains tax is probably the area of deceased estate taxation that causes the most confusion. The rules depend on what happens to each asset and when.

Assets That Pass Directly to Beneficiaries

When an asset passes from the estate to a beneficiary under the will or the rules of succession (for intestate estates), the transfer itself does not trigger a CGT event. The beneficiary takes on the asset with a modified cost base. If the asset was acquired by the deceased before 20 September 1985, the beneficiary's cost base is the market value of the asset at the date of death. If it was acquired after that date, the beneficiary's cost base is generally the deceased's original cost base, adjusted by certain amounts.

The 50% CGT discount is available to the beneficiary on eventual sale if the asset was held for more than 12 months between the original purchase by the deceased and the sale by the beneficiary.

Assets the Estate Sells During Administration

When the LPR sells or transfers an asset during the administration of the estate, for any reason other than transferring it to a beneficiary under the will, a CGT event occurs. The resulting gain or loss is reported in the trust tax return for the estate.

Note that any unapplied capital losses the deceased had at death cannot be used by the estate. They cannot be transferred or carried forward. They lapse at the date of death, which is one reason why the date of death return should include all CGT events that occurred before death.

Special Cases: Foreign Residents, Charities, and Super Funds

If an asset passes to a beneficiary who is a foreign resident, a charity, or a superannuation fund, CGT may apply at the time of the taxpayer's death. This is reported in the date of death return, not the trust return, and is a specific scenario that benefits from professional advice.

What Beneficiaries Need to Know About Tax

The tax questions that matter most to beneficiaries are often different from the questions executors focus on. Here is what beneficiaries in Australia need to understand.

Is Inherited Money Taxable in Australia?

There is no inheritance tax and no estate duty in Australia. Money or assets you receive as a beneficiary of an estate are generally not taxable income for you at the time you receive them. You do not declare an inheritance on your personal tax return simply because you received it.

The tax question for beneficiaries arises later, at the point of sale or use, particularly for assets like property and shares that carry embedded capital gains.

 
Superannuation Death Benefits

Superannuation sits outside the estate for most purposes. It does not form part of the deceased's taxable estate unless it is specifically directed to the estate by the super fund trustee. How it is taxed depends on who receives it.

Superannuation paid to a tax-dependant beneficiary, which includes spouses, children under 18, and people who were financially dependent on the deceased, is generally received tax-free.

Superannuation paid to an adult non-dependent child, or to the estate itself and then distributed to non-dependent beneficiaries, may be subject to tax on the taxable component. The tax-free component is always received tax-free. The taxable component paid to a non-dependent beneficiary is taxed at 15% plus the Medicare levy, or 30% plus the Medicare levy if it comes from an untaxed source such as certain public sector funds.

 
When Beneficiaries Sell Inherited Assets

This is where most beneficiaries encounter a tax consequence. When you sell an asset inherited from a deceased estate, such as shares or an investment property, you may have a capital gain that forms part of your assessable income in the year of sale.

The gain is calculated from the modified cost base described above, and the 50% discount applies if the combined holding period of the deceased and the beneficiary exceeds 12 months. The gain is taxed at your marginal income tax rate after the discount.

The main residence exemption may apply to an inherited property if certain conditions are met, including that the property was the deceased's main residence at the time of death and it is sold within two years. If the two-year period passes without a sale, the exemption may only partially apply depending on the circumstances. Extensions to the two-year period can be requested from the ATO in genuine cases.

 
Common Mistakes Executors Make

Executors are often navigating these obligations for the first time, under emotional pressure, and without a clear map of what comes next. These are the errors that come up most consistently.
 

• Distributing assets to beneficiaries before the notice of assessment arrives and any tax is settled. This is the most consequential mistake because it can create personal liability for the executor.
• Assuming there are no outstanding prior year returns. Many people who were retired, self-employed, or managing investment income had lodgement obligations that were not met. The ATO can identify these when notified of the death.
• Missing the lodgement deadline for the date of death return. The return is generally due by 31 October following the date of death, or 15 May if a registered tax agent is used.
• Not applying for a trust TFN when the estate will earn income after death. The estate cannot lodge a trust return or operate accounts without its own TFN.
• Forgetting that capital losses from the deceased's prior years cannot be used by the estate. These lapse at death and must be applied in the date of death return if they can be used at all.
• Overlooking the two-year main residence exemption window for inherited property. If the property is not sold within two years and no extension is sought, the exemption may be lost or reduced.
• Attempting to access the deceased's ATO records or lodge returns without first registering as the authorised LPR. The ATO will not release information or accept lodgements from an unregistered representative.

 
When to Use a Registered Tax Agent for a Deceased Estate

A registered tax agent can lodge the date of death return electronically on behalf of the estate, rather than using the paper form process the ATO requires for LPRs acting without an agent. This is faster and reduces the risk of processing delays.

Beyond the practicality of lodgement, the situations where professional advice most clearly pays for itself in this context include:
 

• Estates with investment properties, share portfolios, or business interests where CGT calculations are complex
• Situations where the deceased had outstanding prior year returns that need to be prepared and lodged
• Estates with superannuation death benefits flowing to a mix of dependent and non-dependent beneficiaries
• Any estate where a foreign resident, charity, or superannuation fund is a beneficiary, as CGT rules differ
• Executors who are uncertain about whether a trust tax return is required and for how many years
• Situations where the ATO has contacted the estate with queries or assessments that need a professional response

 
The cost of professional assistance for a deceased estate lodgement is a deductible expense of the estate. It is claimable in the date of death return regardless of when it is incurred.

Dealing with a deceased estate is complicated enough without getting the tax obligations wrong.

H&R Block's registered tax agents have specific experience with deceased estate lodgements, executor obligations, and the CGT rules that apply when assets are transferred or sold. We can handle both the date of death return and the estate trust return on your behalf, and communicate with the ATO so you do not have to.

Contact your nearest H&R Block office to discuss your deceased estate situation.