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  • When and how to lodge returns for a deceased estate

    You may need to lodge trust tax returns for a deceased estate if it earns income after the person's death. If a return needs to be lodged, the estate is treated as a trust for tax purposes.

    This is different to the final tax return for the deceased person, which is for the period up to the date of death.

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    What a trust tax return is for

    Finalising a deceased estate typically takes 6 to 12 months, but can take longer.

    Trust tax returns are used to:

    • report the income of the estate after the person's death, such as rental income or share dividends
    • claim any tax refund or franking credits owed to the estate.

    Trust tax returns may need to be lodged each year until the estate is finalised.

    This is different to:

    • the date of death tax return, which is for the period before the person died
    • tax returns for a testamentary trust, which is a separate trust created under the terms of a will and continues after the deceased estate is finalised.

    Who can lodge a trust tax return

    You can lodge a trust tax return once you have notified us of the person's death and been entered on our records as the person who is managing their tax affairs.

    Usually the legal personal representative (LPR) lodges trust tax returns for the deceased estate.

    If you are not an authorised LPR, we will assess the lodged tax returns and determine the appropriate treatment within the law and our internal policies.

    When a trust tax return is required

    For the first 3 income years of a deceased estate, you must lodge a trust tax return if any of the following apply in that year:

    For income year 4 and later income years, you must lodge a trust tax return if the deceased estate earns any income (including capital gains).

    You can lodge a trust tax return even if it is not required. For example, you may wish to lodge a return to claim franking credits on dividends paid to the estate.

    The first income year of a deceased estate starts the day after the person died, and ends on the next 30 June.

    Example: lodging tax returns for a deceased estate

    Maree died on 4 March 2021. Her LPR is her son, Zach.

    Individual tax return

    Zach lodges a date of death individual tax return for Maree. This covers Maree's income from 30 June 2020 to 4 March 2021.

    Deceased estate trust tax returns

    For Maree's estate, income year 1 is 5 March 2021 to 30 June 2021. In this income year:

    • the estate's income is $9,500, which is below the tax-free threshold
    • there are no presently entitled beneficiaries or non-resident beneficiaries.

    Therefore Zach does not need to lodge a trust tax return for the estate.

    Income year 2 is 1 July 2021 to 30 June 2022. In this income year:

    • the estate's income is $30,000, which is above the tax-free threshold
    • therefore Zach must lodge a trust tax return for the estate.

    Income year 3 is 1 July 2022 to 30 June 2023. In this income year:

    • the estate is finalised, on 31 August 2022
    • the estate's income is $5,000, which is below the tax-free threshold
    • there are presently entitled beneficiaries at the end of the income year
    • there are no non-resident beneficiaries.

    Therefore Zach needs to lodge a trust tax return for the estate. He contacts the ATO to advise that the deceased estate will lodge no further returns.

    End of example

    Getting a TFN for a deceased estate

    You will need a trust TFN if you need to lodge a trust tax return.

    If the estate is not running a business

    You can apply for the trust TFN online through the Australian Business Register.

    Apply online for TFN

    Alternatively, you can download and complete the paper form: TFN application for a deceased estate (PDF, 297KB)This link will download a file.

    Generally the LPR or their appointed representative applies for the trust TFN.

    If there is no authorised LPR, and you are managing a small estate and wish to lodge a trust return to claim franking credits or other low value amounts, you will need to apply for a trust TFN. We will assess the trust returns to determine the appropriate treatment within the law and our internal policies.

    If the estate is running a business

    If you are the LPR and are continuing the deceased's business in order to finalise the estate, you need to apply for a new Australian business number (ABN) as well as a trust TFN. You cannot use the business's existing ABN.

    You can apply for the TFN and ABN at the same time.

    Apply online for TFN and ABN

    In the online application you will be asked 'For taxation purposes which type of entity is the applicant?'

    • select Company, Partnership, Trust or other organisation
    • select Trust / Deceased estate.

    Only the LPR or their appointed representative can apply for the ABN.

    Lodging a trust tax return

    You can lodge a trust tax return for the deceased estate using the paper form Trust tax return.

    If you are the LPR of the deceased estate and have appointed a tax agent to help you, the agent can prepare and lodge the return online.

    Income to include in a trust tax return

    You need to include all income the deceased estate has earned since the date of death, including:

    • capital gains on the sale or transfer of assets, if this was not done as part of the will or the rules of succession
    • super lump sums or employment termination payments.

    Capital gains

    If an asset passes to a beneficiary of the estate (for example, under the will or rules of succession):

    If you transfer or sell an asset of the estate for any other reason, you need to include any capital gain or loss in the trust tax return. This applies even if the transfer or sale is to a person who is a beneficiary.

    If the deceased had any unapplied net capital losses when they died, these cannot be used to offset against any net capital gains of the deceased estate.

    Employment termination payments

    The deceased person's employer may pay their estate a death benefit employment termination payment (ETP).

    You will receive a PAYG payment summary – employment termination payment. It will show the tax-free and taxable components.

    The ETP is taxed as if it was made directly to the beneficiaries, except that the Medicare levy does not apply.

    Last modified: 22 Dec 2021QC 40483