Last updated 14 April 2022
The executor or administrator of an estate is usually required to lodge an income tax return on behalf of the deceased for the period from the beginning of the financial year until the deceased’s death and then on behalf of the estate from the date of death to the end of the financial year. Returns may then have to be lodged every year until the finalisation of the estate.
Capital gains tax
Capital gains tax may be payable if:
- the personal representative sells a taxable asset of the deceased in the course of administering the estate
- a beneficiary sells a taxable asset derived by the beneficiary from the estate
- a taxable asset (other than money) is left to a charity, a complying superannuation fund or a foreign resident.
While certain personal use assets are exempt from capital gains tax, most assets of any significant value (e.g. antique furniture, jewellery or rare books) are not. A person’s sole or main residence continues to be exempt from capital gains tax, provided it is sold within 24 months of the date of the deceased’s death. It would be prudent to obtain professional advice before disposing of assets on which capital gains tax may be payable.
Superannuation is held by a trust and is not, strictly speaking, an estate asset. Upon the death of a person, the trustee of the superannuation fund has the discretion to pay the superannuation to a person’s personal representative or dependant (e.g. a spouse, child, interdependent or financial dependant) who are defined under s 10(1) of the Superannuation Industry (Supervision) Act 1993 (Cth).
If superannuation is paid by the trustee to the personal representative then it becomes an asset of the estate and is dealt with by the person’s will.
If a person makes a valid binding death benefit nomination or revisionary pension, then the trustee will not have discretion and will be compelled to pay the superannuation in accordance with it.