Frequently Asked Questions

Below are some common questions presented to the Vincents Estates Team.

We hope they can provide you with a little more clarity and some peace of mind…

The executor is personally responsible for finalising the tax affairs of the deceased including:

  • lodgement of any outstanding prior year income tax returns;
  • lodgement of a final return, known as a date of death return covering the period from 1 July to date of death; and
  • discharging any associated tax liabilities.

In relation to the estate, the executor is also personally responsible for:

  • lodgement of any trust income tax returns;
  • discharging any associated tax liabilities; and
  • providing beneficiaries with the information they need to include distributions in their own returns and in certain cases paying tax on their behalf.

Why is it important for an executor to address any tax issues?

The executor may become personally liable for any outstanding tax debts or unidentified tax obligations if the executor has distributed all the assets of the estate to the beneficiaries.

How can Vincents help?

Time is of the essence; contact us when you are first appointed as executor or when your law firm is engaged to assist the executor, to identify any outstanding tax debts and obligations.

We will deliver this service through our Tax Status Report This will provide you with a summary of the deceased’s income tax lodgement history and details of any outstanding obligations. As a result, the executor is provided with the necessary knowledge, early on in the estate administration process, to address the tax affairs of the deceased.

There may be a number of reasons it may be preferable or the executor is required to lodge an income tax return, for example, the deceased had:

  • tax withheld from the income they earned
  • carried on a business
  • earned taxable income exceeding the tax-free threshold
  • franking credits on investments or tax withheld from interest or dividends because no Tax File Number was quoted to the investment body.

If the deceased’s circumstances were such that the lodgement of income tax returns was required, the executor will need to arrange for the preparation and lodgement of outstanding prior year income tax returns and submit a final tax return on the behalf of the deceased.

If it is determined that an income tax return is not required for the deceased, a non-lodgement advice can be prepared and lodged with the Australian Taxation Office.

What is the difference between lodging an income tax return and a non-lodgement advice?

The executor may choose to lodge an income tax return rather than a non-lodgement advice, even if the deceased’s circumstances do not require an income tax return to be lodged (i.e. taxable income below the tax-free threshold).

Income Tax Return

Lodging an income tax return means the Commissioner of Taxation is limited to a 2 or 4 year period from date of assessment to audit the returns. It should be noted in the case of fraud or tax evasion, the Commissioner has an unlimited timeframe in which to amend returns.

As it is the responsibility of the executor to determine if the deceased and the estate has or will have any tax obligations, lodging income tax returns means the amendment clock starts ticking.  When this time period elapses, any errors or unintended omissions, due to the difficulty in locating information, are in effect quarantined.

The executor may find peace of mind in restricting their exposure to a limited period of time, due to the executor’s personal liability for any outstanding tax obligations, if the executor has distributed all of the estate assets to the beneficiaries.

Non-lodgement advice

Submitting a non-lodgement advice when the deceased is not required to lodge an income tax return:

  • updates the Australian Taxation Office (ATO) in relation to the deceased’s status; and
  • will stop correspondence from the ATO in relation to any outstanding lodgement obligations.

A non-lodgement advice or other type of return, such as a refund of imputation credits, does not limit the audit period of the Commissioner.  As a result, the executor is exposed to an unlimited time frame for the ATO to issue an amended assessment if the ATO finds any discrepancies.

How can Vincents help?

Contact the Vincents Estates Team to identify any tax obligations.  We recommend you contact us when you are first appointed as executor or when your law firm is engaged to assist the executor.

Tax Status Report

Our Tax Status Report  will provide you with a summary of the deceased’s income tax lodgement history and details of any outstanding obligations.  This provides the executor with the necessary knowledge, early on in the estate administration process, to address the tax affairs of the deceased.

Deceased income tax return

The final return of the deceased has a number of specific tax rules, which unfortunately for the executor, can be missed by an accountant who does not specialise in this area.  Our team has the knowledge and expertise to address these issues.

By completing our Deceased Income Tax Return Form and supplying the supporting documents listed, the Vincents Estates Team can advise you on the tax obligations of the deceased.

The deceased’s TFN can most commonly be found on:

  • copy of a prior year tax return
  • Australian Taxation Office (ATO) correspondence
  • PAYG payment summary
  • some Centrelink forms or correspondence

If the deceased’s TFN cannot be located the ATO will need to be contacted.

How can Vincents help?

Contact the Vincents Estates Team to deal with the ATO on your behalf.  Time is of the essence; contact us when you are first appointed as executor or when your law firm is engaged to assist the executor.

By completing our missing TFN Request Form and supplying the documents listed, the Vincents Estates Team will:

  • obtain the deceased’s TFN from the ATO;
  • confirm the deceased’s tax lodgement status;
  • obtain a copy of last tax return lodged; and
  • obtain copies of any information the ATO holds on file if there are income tax returns that need to be lodged.

The deceased and the estate are treated as separate taxpayers.  As a result, the executor must apply for a separate TFN to that of the deceased, if the estate will be required to lodge an Income Tax Return.

Also, when an interest earning bank account is opened, an estate TFN will need to be provided to the bank to avoid TFN withholding tax.  If the executor provides their own personal TFN, the interest earned may be incorrectly declared on their personal tax return rather than that of the deceased estate.

How can Vincents help?

Contact the Vincents Estates Team to obtain a deceased estate TFN.

Applying for a TFN is made quick and easy by completing our Deceased Estate TFN Application Form.

The executor will be required to lodge a return for the deceased estate unless the below exemption is met:

  • the deceased person died less than 3 years before the end of the income year; and
  • no beneficiary is presently entitled to a share of the income of the deceased estate; and
  • the taxable income of the deceased estate is less than the individual tax-free threshold; and
  • all beneficiaries of the deceased estate are Australian residents.

Only the income received by the deceased estate after the person’s death is taken into account.  This is because the estate requires a separate tax return from the final personal tax return of the deceased.

A tax return may need to be lodged each year until the deceased estate is fully administered (all of its assets and income are distributed to the beneficiaries) and no longer deriving income.

Even if the exemption is met it may still be worthwhile to lodge a return for the deceased estate to limit the time period of exposure for the executor or to claim franking credits and TFN withholding (if applicable).

How can Vincents help?

A number of specific tax rules relate to deceased estates, which unfortunately for the executor, can be missed by an accountant who does not specialise in this area.  Our team has the knowledge and expertise to address these issues.

By completing our Estate Income Tax Return form and supplying the supporting documents listed, the Vincents Estates Team can ensure the tax obligations of the estate are addressed.

Who pays the tax on the net income of the deceased estate depends on whether the beneficiaries are presently entitled and whether they are a non-resident or under a legal disability (minor under 18, bankrupt or declared legally incapable because of a medical condition).

As a result, the net income of the deceased estate is taxed either in the hands of:

  • the executor;
  • beneficiaries who are presently entitled (who are Australian residents for tax purposes and not under a legal disability), or
  • the executor will be assessed for tax on behalf of a presently entitled beneficiary if the beneficiary is a non-resident, under a legal disability or has not quoted their Tax File Number (TFN).

Why is it important for an executor to address any tax issues?

The executor is responsible for withholding and submitting tax on behalf of the estate and on distributions to beneficiaries if they are a non-resident or under a legal disability and when a beneficiary fails to quote their TFN.

If this matter is not addressed appropriately, the executor may become personally liable for any outstanding tax debts if the executor has distributed all the assets of the estate to the beneficiaries.

How can Vincents help?

A number of specific rules regulate who is responsible for paying the tax in relation to a deceased estate.  The Vincents Estates Team can assist with the registration process, calculation of the correct withholding tax amounts and meeting the annual reporting obligations.

By completing our Estate Income Tax Return form and supplying the supporting documents listed, the Vincents Estates Team can ensure the tax obligations of the estate are addressed.

The deceased estate and a testamentary trust are separate trusts and as a result the trustees of the testamentary trust must apply for a separate TFN.

When investments or bank accounts are established the trustees will need to provide the testamentary trust TFN to the financial institution to avoid TFN withholding tax.  The trustees should not provide their own personal TFN, as any income earned may be incorrectly declared on their personal tax return rather than that of the testamentary trust.

How can Vincents help?

Contact the Vincents Estates Team to obtain a testamentary trust TFN.

Applying for a TFN is made quick and easy by completing our Testamentary Trust TFN Application Form.

The estate and a testamentary trust are separate taxpayers and therefore a separate income tax return is required to be lodged.

In addition to a separate income tax return, financial statements are also required as the assets are held on trust for the benefit of the beneficiaries.

How can Vincents help?

Both estates and testamentary trusts can have a number of complex and unusual tax situations.  If this is not managed appropriately, estate assets can be unnecessarily diminished.  Our team has the knowledge and expertise to address these issues.

Contact the Vincents Estates Team to take care of the accounting and tax requirements of the testamentary trust.

By completing our Testamentary Trust – Accounts and Tax Return form and supplying the supporting documents listed, the Vincents Estates Team can advise you on your obligations as trustee(s).

A Special Disability Trust (SDT) is a trust established by parents and immediate family members for the future care and accommodation needs of a person with a severe disability (the beneficiary).Through the effective implementation and management of an SDT it can provide additional funds for the future care and accommodation needs of the beneficiary. An SDT achieves this through maintaining social security entitlements, with the added benefit of asset protection for the beneficiary.

For more information and a detailed overview of an SDT please download the Special Disability Trusts Fact Sheet.  Please feel free to contact the Vincents Estates Team, if you have any further questions or need additional help with an SDT.

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Please feel free to contact the Vincents Estates Team, if you have any further questions, need additional help with the forms or if you have any concerns about your tax obligations as the executor for the estate here:

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