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Edited version of your written advice
Authorisation Number: 1051241505216
Date of advice: 27 June 2017
Ruling
Subject: Deceased estate - assessable income
Question
Is the income derived by the deceased prior to their death included in the assessable income of the deceased estate?
Answer
No.
This ruling applies for the following periods
Year ended 30 June 2016
Year ending 30 June 2017
Year ending 30 June 2018
The scheme commenced on
July 2015
Relevant facts
The deceased died.
The executor is not a beneficiary of the estate.
The executor has been unable to find the tax file number (TFN) of the deceased.
The deceased lived overseas for many years.
The deceased recently came back to Australia and remained in Australia until their death.
Probate has been granted.
The deceased died with some assets and liabilities.
The executor has been able to retrieve information in relation to income earned in recent years.
Relevant legislative provisions
Income Tax Assessment Act 1936 section 99
Income Tax Assessment Act 1936 subsection 99A(2)
Reasons for decision
Deceased estate
On the death of a person, the property of the deceased passes to their estate and legal control is exercised by an executor or administrator.
A deceased estate represents a legal entity or relationship quite separate from the individual. That is, for taxation purposes, an individual is a separate entity from the deceased estate. Therefore the income derived by an individual prior to their death should be declared on their individual tax return and income derived after death is declared on the deceased estate trust tax return.
The trustee of a deceased estate is generally required to file tax returns of the deceased’s income up to the date of death on the return form applicable to individuals as well as a trust tax return for the income derived after death by the deceased estate.
The deceased estate needs a TFN. This TFN is different to that of the individual. Where a TFN is not found for the individual, then a TFN needs to be applied for to enable the outstanding tax matters of the individual to be finalised.
In this case, as there is no information available in relation to the deceased’s TFN, an application for an individual TFN needs to be completed. This form is available on the Australian Taxation Office (ATO) website ato.gov.au.
Once the TFN application has been processed and a TFN has been obtained for the deceased, then the outstanding individual tax returns can be lodged. Any associated tax liabilities of the deceased person are paid out of the deceased estate.
The trustee of a deceased estate is also generally required to file a trust tax return for the income derived after death by the deceased estate. If assessable income, including interest, rent or business income is received after a person’ death, it is part of the deceased estate’s income. The trustee is then liable for any tax due on those amounts following the lodgment of the deceased estate’s trust tax returns.
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