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  • Appendix 8: Instructions to trustees of deceased estates

    These instructions will help you complete the trust tax return for a deceased estate.

    For tax purposes, income received by a deceased estate after the person's death is treated separately to the income of the deceased person. In addition to any final tax return for the deceased person for the income year in which they died, called a 'date of death' tax return, it may be necessary that a trust tax return be completed for the deceased estate.

    For more information on what to do when someone dies, see Deceased estates. This includes:

    A deceased estate is not the same as a testamentary trust. A testamentary trust is a trust that is established under the terms of a will, codicil, court order or intestacy. Where there is both a deceased estate and testamentary trust, separate returns and TFNs may be required. This appendix is focussed on providing additional guidance to persons completing a trust tax return for a deceased estate.

    How to complete a deceased estate return

    You may need to lodge a trust tax return for a deceased estate if assessable income is received after an individual taxpayer’s death. This includes interest, rent, and business or employment income. This income is part of the deceased estate. The trustee is then responsible for paying tax on the deceased estate's net income.

    You need a trust TFN

    Before completing the tax return, you will need a trust TFN and in some cases an ABN. If the trustee is continuing the deceased person's business, a trust ABN is also required. The trustees can apply at abr.gov.auExternal Link.

    You may need to complete the following items in the trust tax return:

    Trust information

    Complete all the relevant Trust information on the trust tax return form.

    Name of trust – show the name of the trust in this format or similar: THE ESTATE OF JOHN CITIZEN DECEASED.

    Type of trust – print code D at Print the code representing the type of trust and complete the date of death box.

    Income excluding foreign income – items 5 to 15

    Complete the appropriate income items listed below.

    Items:

    5 Business income and expenses

    Include at item 5 Business income and expenses only business income amounts derived, and expense amounts incurred directly by the trust where the trustee is continuing the deceased person's business.

    Income and expenses are divided into three columns:

    • primary production, showing relevant amounts of income and expenses from primary production
    • non-primary production, showing relevant amounts of income and expenses from non-primary production
    • totals, showing the total of the previous two columns.
    6 Tax withheld

    Print at item 6 Tax withheld

    • label T Tax withheld where ABN not quoted the total of amounts withheld from income subject to withholding where an ABN was not quoted
    • label U Credit for tax withheld – foreign resident withholding (excluding capital gains) the total amount of tax withheld from payments subject to foreign resident withholding.
    8 Partnerships and trusts

    Print at item 8 Partnerships and trusts, Primary production at:

    • label A Distribution from partnerships – any amount of primary production partnership income
    • label Z Share of net income from trusts – the trust's share of primary production income which has been included in the net income (for tax purposes) of other trusts after the date of death
    • label S Deductions relating to amounts shown at A and Z – any deductions for the deceased estate’s own expenses in relation to distributions of primary production income.

    Print at item 8 Partnerships and trusts, Non-primary production at:

    • label B Distributions from partnerships, less foreign income – any amount of non-primary production partnership income
    • label R Share of net income from trusts, less capital gains, foreign income and franked distributions – the trust's share of non-primary production income which was included in the net income (for tax purposes) of other trusts after the date of death
    • label F Franked distributions from trusts – the trust's share of franked distributions which has been included in the net income (for tax purposes) of other trusts after the date of death
    • label T Deductions relating to amounts shown at B and R – any deductions for the deceased estate’s own expenses in relation to distributions of non-primary production income
    • label G Deductions relating to franked distributions from trusts in label F – any deductions for the deceased estate’s own expenses in relation to distributions of franked distributions from other trusts.

    Print at item 8 Partnerships and trusts, Share of credits from income at:

    • label C – any share of credit for tax withheld where an ABN was not quoted
    • label D – any share of franking credit from franked distributions
    • label E – any share of credit for TFN amounts withheld from interest, dividends and unit trust distributions
    • label O – any credit for TFN amounts withheld from payments from closely held trusts.
    9 Rent

    Print at item 9 Rent at:

    • label F Gross rent the gross amount of rent including any booking or letting fees
    • label G Interest deductions the total interest expenses incurred in earning rental income
    • label X Capital works deductions the total capital works deduction for rental buildings
    • label H Other rental deductions the expenses that relate to this rental income
    • label Net rent the net amount of any rent.
    11 Gross interest

    Before you complete this section, copy the details from all interest statements to worksheet 3. Keep the worksheet with the trust’s tax records.

    Print at item 11 Gross interest – label J the total gross amount of interest received or credited from:

    • banks and credit unions
    • building societies
    • debentures
    • notes and deposits
    • discounted or deferred interest securities
    • government securities
    • Australian Government loans issued before 1 November 1968
    • interest paid by us.

    Print at label J the appropriate amount of discount, interest or other gain which accrued this income year on a discounted, deferred interest or capital-indexed security:

    • that was issued after 16 December 1984
    • that had a maturity date of over 12 months from the issue date, and
    • where the sum of all payments under the security (except periodic interest, for example, a coupon rate) exceeds its issue price by greater than 1.5%.

    TFN amounts withheld from gross interest

    Print at item 11 Gross interest – label I TFN amounts withheld from gross interest the TFN amounts withheld from gross interest.

    We may check the amounts shown at item 11 Gross interest with our own records to determine accuracy.

    For more information, see Data matching.

    12 Dividends

    Dividends are usually assessable when they are credited to a person.

    Show at item 12 Dividends at:

    • label K Unfranked amount – the total amount of  
      • unfranked dividends
      • unfranked amount of partially franked dividends received
       
    • label L Franked amount – the franked amount of franked dividends received
    • label M Franking credit – the amount of franking credits received directly from a paying company
    • label N TFN amounts withheld from dividends – the total of TFN amounts withheld from dividends received.

    We may check the amounts shown at item 12 Dividends with our own records to determine accuracy, see Data matching.

    13 Superannuation lump sums and employment termination payments

    Show at item 13 Superannuation lump sums and employment termination payments at:

    • label V Taxed element – the taxed element of the death benefit superannuation lump sum where the beneficiary is a non-dependant.
    • Label W Untaxed element – the untaxed element of the death benefit superannuation lump sum where the beneficiary is a non-dependant.
    • Label X Taxable component – the taxable component of the death benefit employment termination payment where the beneficiary is a dependant.
    • Label Y Taxable component – the taxable component of the death benefit employment termination payment where the beneficiary is a non-dependant.

    A superannuation death benefit paid to a trustee is taxed in the hands of the trustee in the same way that it would be taxed if paid directly to a beneficiary. That is, the portions of the payment are subject to tax to the extent the beneficiary is a dependant or a non-dependant of the deceased. There is no tax payable to the extent that the payment is a lump sum benefit made to dependants or eligible non-dependants of the deceased.

    Eligible non-dependants of Australian Defence Force and Australian police force (including Australian Protective Services) members who have died in the line of duty are treated as dependants for tax purposes.

    Employment termination payments (ETPs) paid to a trustee is taxed in the hands of the trustee in the same way as it would be taxed if paid directly to a beneficiary. That is, the portions of the payment are subject to tax to the extent that the beneficiary is a dependant (see Definition of terms) or a non-dependant of the deceased.

    14 Other Australian income

    Print at item 14 Other Australian income any other income received by the estate after the date of death, including:

    • salary and wages
    • assessable amounts of benefits under friendly society funeral policies taken out after 31 December 2002.

    Amounts of recreation leave and long service leave, ordinarily assessable under sections 83-10 and 83-80 of the ITAA 1997, are exempt from tax when paid directly to the trustee of a deceased estate.

    Friendly society funeral policies are a type of life insurance policy issued by a friendly society for the sole purpose of providing benefits to pay for the funeral of an insured person. In some instances, the policy holder pays a funeral director upfront for a set funeral service and this payment is managed by a friendly society in a funeral policy.

    Benefits received by the deceased estate under a friendly society funeral policy that was taken out before 1 January 2003 are exempt from tax.

    If the deceased person was insured under a friendly society funeral policy taken out after 31 December 2002, the investment income from the funeral policy is included in the assessable income of the estate, if the estate’s trustee:

    • instructs the friendly society to pay a funeral director or other party for the insured person’s funeral expenses, or
    • is reimbursed for the funeral expenses.

    In these circumstances, the statement of distribution issued by the friendly society will advise the amount of income to be included on the trust tax return.

    If the policy proceeds are paid to a funeral director, either under a policy assignment or as the nominated beneficiary, they are included in the funeral director’s assessable income and no amount needs to be included in the estate’s assessable income.

    15 Total of items 5 to 14

    Print at item 15 Total of items 5 to 14 the total of the income amounts reported at items 5 to 14.

    Deductions – items 16 to 20

    Complete the appropriate deductions items listed below.

    16 Deductions relating to Australian investment income and franked distributions

    Print at item 16 Deductions relating to Australian investment income and franked distributions at:

    • Label P Australian investment income the expenses incurred in earning Australian investment income other than franked distributions.
    • Label R Franked distributions the expenses incurred in earning franked distributions.
    18 Other deductions

    Print at item 18 Other deductions – label Q the total amount any other tax-related expenses.

    Don't include capital expenses incurred in administering the estate.

    19 Total of items 16 to 18

    Print at item 19 Total of items 16 to 18 the total deduction amounts reported at items 16 to 18.

    20 Net Australian income or loss

    Print at item 20 Net Australian income or loss – other than capital gains, the net income or loss relating to Australian income, that is, the amount shown at item 15 Total of items 5 to 14, minus the amount shown at item 19 Total of items 16 to 18. If this amount is a loss, print L in the box at the right of the amount.

    Other items – items 21 to 32

    Complete the appropriate items listed below.

    21 Capital gains

    Print at Capital gains – item 21 – label A Net capital gain the net capital gain made by the trustee of the estate.

    Capital losses incurred by the deceased before their death cannot be carried forward to their estate.

    Before you complete this section, you may first need to complete a Capital gains tax (CGT) schedule.

    For more information, see Guide to capital gains tax 2022.

    22 Attributed foreign income

    Print at item 22 Attributed foreign income at:

    • Label M Listed country – the amount of gross attributed foreign income from controlled foreign entities and transferor trusts of listed countries.
    • Label X Unlisted country – the amount of attributed foreign income from controlled foreign entities in unlisted countries.
    23 Other assessable foreign source income

    Print at item 23 Other assessable foreign source income at:

    • Label B Other assessable foreign source income: Gross – the gross amount of assessable income derived from foreign sources, including  
      • amounts distributed from partnerships and other trusts
      • New Zealand franking company dividends and supplementary dividends
      • any foreign tax withheld and/or paid at source on that income
       
    • label V Other assessable foreign source income: Net – the net income derived from foreign sources
    • label Z Foreign income tax offset – the amount of any foreign income tax paid by the trust on foreign source income it derives
    • label D Australian franking credits from a New Zealand franking company – the amount of Australian franking credits that are included in the net income of the trust because of franked dividends received from a New Zealand franking company directly or indirectly through a partnership or other trust; see Appendix 1.
    24 Total of items 20 to 23

    Print at 24 Total of items 20 to 23 the total amount of net income or loss, plus any net capital gain amount.

    25 Tax losses deducted

    Print at Tax losses deducted – item 25 – label C tax losses from earlier income years, which are deductible in 2021–22 under section 36-15 of the ITAA 1997.

    26 Total net income or loss

    The amount at Total net income or loss – item 26 equals the amount at item 24 Total of items 20 to 23 if no amount is disclosed at item 25 Tax losses deducted.

    27 Losses information

    Print at Losses information – item 27 at:

    • label U Tax losses carried forward to later income years – the undeducted amount of tax losses incurred by the trust that can be carried forward to a later income year under section 36-15 of the ITAA 1997
    • label V Net capital losses carried forward to later income years – the total of any unapplied net capital losses from collectables and all other CGT assets and CGT events.
    Items 28 to 32

    Complete the following items relevant to the deceased estate:

    Key financial information – items 33 to 36

    Complete the relevant Key financial information at items 33 to 36.

    Business and professional items – items 37 to 51

    Complete the relevant Business and professional items information at items 37 to 51 where the trustee is continuing the deceased person's business during the administration of the estate.

    Tax offsets – items 52 to 54

    Complete the relevant Tax offsets at items 52 to 54.

    Medicare levy reduction or exemption – item 55

    Complete the relevant Medicare levy reduction or exemption entries at item 55.

    Income of the trust estate – item 56

    Print at Income of the trust estate – item 56 – label A the income of the trust estate for trust law purposes.

    If the income of the trust estate is a loss amount, then print 0 at label A.

    Statement of distribution – item 57

    Generally, beneficiaries of a deceased estates will not be presently entitled to the income of a deceased estate until it has been fully administered, see Reporting income and paying tax in the stages of administration.

    However, if you pay any income to a beneficiary before the estate is fully administered, they are considered to be presently entitled to it, see Is a beneficiary presently entitled to a share of the income of the trust estate?

    If there has been no distribution of income from the deceased estate, include at the end of item 57 Income to which no beneficiary is presently entitled the net (taxable) income of the trust shown at item 26 Total net income or loss, see Is there income of the trust estate to which no beneficiary is presently entitled?

    Print at label V Assessment calculation code an assessment calculation code. For a list of trust assessment calculation codes, see Appendix 12.

    For further instructions on how to complete item Statement of Distribution - item 57, see:

    Trustee beneficiaries

    If the deceased estate has distributed amounts to trustee beneficiaries, the trustee needs to consider whether they are required to lodge a TB statement.

    For more information on these reporting requirements, see:

    Choice for resident trustee to be assessed to capital gains on behalf of beneficiaries – item 58

    Eligible trustees of all resident trust estates in respect of capital gains that meet certain criteria can choose to be assessed on part or all of an amount of a net capital gain that is included in the net income of a trust. For more information, see Choice for resident trustee to be assessed to capital gains on behalf of beneficiaries – item 58.

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    Last modified: 26 May 2022QC 68031