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  • Declaring income and paying tax in the stages of administration

    The responsibility for declaring income and paying tax depends on the stage of administration and the beneficiaries' circumstances.

    Before probate is granted

    At this stage, beneficiaries are not presently entitled to the income of a deceased estate.

    You include any income earned in your Trust tax return – see Doing a trust tax return for a deceased estate.

    Probate is granted but final distribution is not ready

    At this stage, generally, beneficiaries are not presently entitled to the income of a deceased estate, however you can do an interim distribution if you are certain that the remainder of the estate is sufficient to cover any outstanding liabilities.

    If you pay any income to a beneficiary before the estate is fully administered, they are considered to be presently entitled to it.

    If you receive Superannuation death benefits and death benefit termination payments they are considered income to which no beneficiary is presently entitled.

    If you distribute any income and a beneficiary is:

    • under a legal disability (such as being under 18), then you include that income in your Trust tax return
    • a non-resident, then you include that income in your Trust tax return or withhold tax from their income
    • a resident and not under a legal disability, the beneficiary is responsible for include that income in their Tax return for individuals.

    See also:

    Distribution of the estate

    At this stage, obligations are paid or provided for in full and net income of estate is available for distribution.

    When you distribute income and a beneficiary is:

    • under a legal disability (such as being under 18), then you include that income in your Trust tax return
    • a non-resident, then you include that income in your Trust tax return or withhold tax from their income
    • a resident and not under a legal disability, the beneficiary is responsible for including that income in their tax return unless you or the beneficiary have asked for the income to be apportioned.

    See also:

    In the income year in which the deceased estate is fully administered, you may be able to apportion the net income:

    • Income derived in the period between the beginning of the income year and the day administration was complete is assessed for tax in your hands as the executor.
    • Income derived in the period between the day administration was complete and the end of the income year is assessed for tax to the beneficiaries who are presently entitled.

    If you want to apportion the net income:

    • you need evidence that it was actually derived during these periods – you can't apportion income into the two periods merely on a time basis
    • you or the beneficiaries must request that the income be apportioned in this way.

    Administration of estate is complete

    The estate is finalised. As the executor, you have no other payment or reporting obligations.

    Last modified: 18 Aug 2016QC 49907