When someone dies: the tax to-do list

If someone close to you dies and you are the one responsible for taking over their tax affairs, there are a number of steps you need to take to advise the ATO of their passing.

This starts with:

• establishing your identity with the ATO as the deceased’s representative; and
• formally notifying the ATO of the death, with a death certificate of the deceased or a grant of probate or letters of administration.

Authorised representative

To have full authority to manage the tax issues of someone who has died – and to have complete access to their information and assets – you’ll need to be their authorised legal personal representative (LPR). A person’s LPR is usually the executor named in their will, or if no executor has been named, a court-appointed administrator (this can be the person’s next of kin). 

To be recognised as an LPR for tax purposes, you’ll need a supreme court (in your state) to recognise that the deceased’s will is legal, allowing you as the executor to represent the deceased’s estate and distribute their assets according to the will.

Where there is no will, a grant of letters of administration are issued to the person (this is often the next of kin) to manage the estate, and they are appointed as the administrator of the estate. 

Tax responsibilities of the LPR

The tax-related responsibilities of the LPR include:

• lodging a “date of death” tax return for the deceased person; and
• providing for any tax liabilities before the estate’s assets are distributed to beneficiaries.

Checking business status

You will need to be aware of whether the deceased person carried on a business and, if they did, you’ll need to seek specialised legal or tax advice.

In the case of a sole trader or a business partner, it’s likely you’ll need to lodge a business activity statement (BAS) for the final quarter of their life, and any outstanding BASs. You will need to pay any tax owing, whichs could include goods and services tax (GST) and capital gains tax (CGT) applicable on the sale of any business assets.

Lodging final tax returns

You also may need to lodge the deceased’s final tax return, known as the “date of death” tax return, and check if any other years’ tax returns are outstanding and arrange payment for those, with help from the ATO to access the deceased’s person’s tax information.

You must also finalise any tax obligations before distributing the assets of the estate to the beneficiaries.

A further tax task is to ascertain whether the estate of the deceased receives any income from assets such as rental property or shares, and/or is due to claim any tax refund or franking credits that are owed.

If this is the case then for tax purposes the estate is treated as a trust and you will need to lodge a trust tax return for the estate.

And finally …

You need to ensure that all tax liabilities have been paid, that credits owing to the deceased person and their estate have been received, and that all tax registrations (such as ABNs and registration for GST) have been cancelled.

After all of these requirements have been met, you will then be able to distribute the assets of the estate to the beneficiaries following probate.

It’s important to be aware that finalising the administration of an estate can take six to 12 months, or sometimes longer.

Source: ATO - Checklist: what to do when someone dies