10 Steps for Managing a Deceased Estate

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When someone dies, the person responsible for dealing with the deceased person’s estate generally knows as the executor will have tax and super issues to manage.

There are no inheritance or estate taxes in Australia, however, beneficiaries of the deceased superannuation fund may be assessed on distributions from the fund after the date of death.

During this grief stricken time, even though managing a deceased estate might be the last thing you want to do, sometimes we don’t get a choice and we have to jump in and get it done. We have put together some important steps to follow in order to ensure the deceased person’s tax affairs are in order.

1. Look after yourself

This is the most important thing.

If you are feeling overwhelmed, don’t hesitate to talk with your friends or family, or phone a confidential counselling service:

  • Lifeline Australia on 13 11 14 (24 hours)
  • Beyond Blue on 1300 224 636 (24 hours)
  • MensLine Australia on 1300 789 978 (24 hours)
  • Griefline on 1300 845 745 (midday to 3.00am)
  • Thirrili – support for Aboriginal and Torres Strait Islander people and communities – on 1800 805 801 (24 hours).

2. Pause tax correspondence

We understand that tax is not your priority right now.

Phone the ATO and STS Accounting Group to let them/us know the person has died. This will stop tax correspondence from being sent to the deceased person.

Usually, the person who phones us is the executor or next of kin, but other people can also notify us.

If you wish, our accountants or the ATO customer service representative can talk you through the next steps.

 

3.  Determine who will manage the deceased’s financial affairs

When you are ready to deal with the deceased’s financial affairs, the first step is to work out who will manage this.

If there is a will and it names an executor, this person (or people – there may be more than one) generally manages the deceased’s financial affairs.

If there is no executor, the next of kin may take responsibility for managing the deceased’s financial affairs.

Completing the administration of a deceased estate typically takes 6 to 12 months but can take longer.

It’s important that you finalise any tax obligations before distributing the assets of the estate.

 

4. Get help if you need it

If you need help with the deceased’s tax affairs, give their STS Accountant a call. We can advise about the deceased’s financial affairs prior to their death.

Services AustraliaExternal Link has information about registering the death and obtaining a death certificate.

The websites of the supreme courts and public trustee in each state and territory have information about managing a deceased estate.

You should seek professional advice if you need help with:

  • contesting a will
  • general administration of a deceased estate
  • applying for a grant of probate or letters of administration
  • what to do when a person dies intestate (without a will).

5. Decide if you need a grant of probate or letters of administration

You will need one of these court-issued documents to be considered the authorised legal personal representative (LPR) by us. The LPR has:

  • full authority to manage the deceased’s tax affairs
  • unrestricted access to ATO-held information and assets of the estate.

If you are managing a small estate you may not need to apply for a grant of probate or letters of administration. However, some people or organisations, including the ATO, who hold assets of the estate may require one of these documents before releasing these assets.

You may also need one of these documents to manage other aspects of the deceased estate.

 

6. Notify the ATO that you are managing the estate

You can tell the ATO  that you will manage the deceased estate’s tax affairs by submitting an official notification of death. They will add your name to the estate’s records.

  • If you are the deceased person’s LPR, with grant of probate or letters of administration, you will have full authority to manage the deceased’s tax affairs.
  • If you are not the LPR,  the ATO can still help you. However, there are legal restrictions on the information and funds that can be released to you.

 

7. Manage any business tax obligations

If the deceased person’s tax affairs included carrying on a business, you may need to seek further advice from a legal practitioner or registered tax agent.

If the deceased person was a sole trader or a partner in a partnership, you may need to lodge a final business activity statement (BAS) for the last tax period. This is usually the quarter in which the person died, and ends the day before their death.

You may also need to lodge any outstanding BASs and pay any tax.

If the deceased person was a partner in a partnership, on their death the partnership may dissolve, depending on the terms of the partnership agreement.

Goods and services tax (GST) and capital gains tax (CGT) may apply to the sale of assets that were used in the business.

 

8. Lodge a final tax return for the deceased person

Check if you need to lodge a final tax return for the deceased person. This is called a ‘date of death’ tax return.

The final tax return covers the income year in which the person died, up to the date of death.

You may also need to lodge any outstanding prior-year tax returns.

To help complete these returns you may need to obtain the deceased person’s tax information from STS or the ATO.

9. Lodge tax returns for the deceased estate

When someone dies, their assets are held in trust by their estate until the assets can be distributed to the beneficiaries. The deceased estate is a separate entity to the deceased individual.

The estate may receive income from these assets. For example, the estate may receive rental income from a property, or dividends from shares.

In this case, you may need to lodge trust tax returns for the estate, and pay any tax from the estate.

You do this for the remainder of the income year in which the person died, and then for each year until the estate is finalised.

 

10. Finalise tax affairs

Check that all tax obligations are provided for before making a final distribution of the deceased’s property.

The LPR is liable to pay any outstanding tax-related liabilities of a deceased person, up to the value of the deceased estate’s assets. The LPR may have to meet those liabilities personally if they distribute the estate’s assets with notice of a claim by the ATO.

 

For any questions relating to the deceased’s financial and business obligations please contact the STS team and we can assist you through these steps in partnership with the ATO.