Taxation of Deceased Estates:

There are various taxation ramifications that need to be considered with respect to deceased estates. These include the responsibilities and duties that the trustee of a decease estate must fulfil and abide by. Thorough and detailed advice from a qualified and experienced Taxation Lawyer can be immensely useful during this difficult and stressful time.

Firstly, a return of the deceased’s income up to the date of death needs to be filed by the trustee.  Separate documentation needs to be filed for individuals as well as a trust return for the income derived after death by the deceased estate. The return of the deceased’s income up to the date of death may take into account expenses incurred by the trustee in relation to the income tax affairs of the deceased. Medical expenses incurred by the deceased and paid by the trustee may be taken into account in the return in calculating the rebate available for medical expenses. There are tax concessions such as the tax-free income threshold that need to be considered and applied if possible. Any losses are also available to offset the income at the date of death. Similarly, the taxpayer’s capital losses can be offset against their capital gains in order to determine the taxpayer’s net capital gain or loss for that return. However, in either case, unrecouped losses cannot generally be carried forward to the estate or the beneficiaries. Any taxation obligations or liabilities served upon the deceased person that remains unpaid needs to be dealt with. Generally, this amount is payable by the deceased’s estate.

Secondly, there are taxation issues that need to be addressed during the period of administration. The personal representative is required to lodge trust returns for income derived or received by the deceased estate after the date of death, this needs to be done per financial year. There are issues of what constitutes assessable income, as income derived by the estate during the period of administration is normally assessable to the estate, not to the beneficiaries, as they are not “presently entitled”.  In addition there is the issue of what rate of taxation is applicable to the estate during administration, which may be the marginal rate depending on the circumstances.  The personal representative must carefully manage the assets to ensure that there are sufficient funds to pay any tax payable by the estate. Sound financial and legal advice from a skilled Taxation Lawyer may also greatly assist you in ensuring that any reporting, disclosure and payment obligations with respect to tax law are complied with.

Lastly, after the period of administration there are various taxation issues. The income may be assessable to the estate or at the hands of the beneficiaries if they are presently entitled to it. The income of the estate is to be apportioned between the trustee and the beneficiaries depending on how the estate is administered.  Proper legal advice with respect of deceased estates by a Taxation Lawyer may be beneficial to ensure that administration is properly performed in accordance with taxation law.

If you would like further information or wish to discuss your deceased estates matter with us please do not hesitate to contact us by telephone on (02) 9233 4048 or by email to info@navado.com.au.

This webpage (and any material or wording appearing on this webpage) is provided for general information purposes only and does not constitute any Legal Advice. It does not take into account your objectives, your instructions or all of the relevant facts and/or circumstances. Navado accepts no responsibility to any person who relies on the information provided on this website. We further refer you to our Disclaimer.