Taxation considerations for deceased estates

Are you the Executor or Administrator of a Deceased Estate? Administering the Estate goes beyond calling in the Estate assets and distributing them to beneficiaries. The role of Executor or Administrator requires understanding and consideration of the different taxation implications of the Estate’s income and assets to ensure that maximum entitlement is distributed to beneficiaries. Not doing so could leave you open to claims against you as an Executor.

What are the different taxation implications that need to be considered?

The different taxation implications that need to be considered include:

·         Tax returns required for the deceased prior to their passing;

·         Tax returns required for the Estate if the Estate earned income;

·         Capital Gains Tax on assets that are sold;

·         Vacant Residential Land Tax on any properties;

·         Double duties on foreign assets or distributions;

·         Taxation strategies to minimise any tax or capital gain payable by the Estate.

Tax Returns for the Deceased and the Estate

Tax returns may still need to be lodged for the deceased for the period before their passing. Executors or administrators must ensure that all the deceased tax returns are up to date.

Even if the deceased was not required to lodge any tax returns, the Estate may still need to lodge tax returns. The Executor or Administrator is responsible for ensuring that Estate tax returns are lodged if the Estate earned income or realised any capital gain on assets.

Capital Gains Tax

The sale of certain assets such as investment properties or shares may trigger a capital gains tax event. This means the Estate will have to lodge a tax return and pay capital gains tax. Ensuring you have proper legal and accounting advice on these matters is crucial to ensuring you fulfil your legal responsibilities as Executor or Administrator.

Vacant Residential Land Tax

Vacant Residential Land Tax has changed from 1 July 2026, now encompassing vacant land that has not been developed in 5 years and properties that are vacant for more than 6 months of the year. Deceased Estate properties are granted some relief, with a deceased’s principal place of residence being exempt from the tax for a period of 3 years. If the deceased’s property has not been sold or transferred within that time period, Vacant Residential Land Tax will apply to the property.

Double duties on foreign assets or distributions

If the deceased held foreign assets, consideration must be given to the possibility of double taxes and duties on these assets. Similarly, if a beneficiary is a foreign beneficiary, meaning they do not reside in Australia, this can trigger additional tax and liability issues for the Estate. Careful consideration must be given to the taxation implications estates with foreign assets or beneficiaries have.

Taxation strategies to minimise any tax or capital gain payable by the Estate 

In some circumstances, beneficiaries of the Estate can be made presently or specifically entitled to the estate’s income and capital gains, which can assist in reducing the taxation liability of the Estate and maximising the distribution to the beneficiaries. It is the role of the executor or administrator to ensure that these taxation implications have been thoroughly considered.

What are your legal obligations as Executor or Administrator of a Deceased Estate?

In short, an Executor or Administrator has legal responsibility to ensure that the Estate is administered in accordance with the law and to act in the best interests of the Estate, which includes ensuring that maximum distribution is received by the beneficiaries. Ensuring you understand and consider all the taxation implications of the estate can assist you in fulfilling your obligations. 

What are the consequences of not fulfilling your legal obligations as Executor or Administrator?

If these issues arise, beneficiaries or creditors may pursue legal action personally against you. In some cases, the executor or administrator may be required to personally repay funds to correct the mistake or account for the estate’s loss. This may mean you could be liable for the costs of legal proceedings in addition to the original sum. This is a large risk to take.

How can Wollerman Shacklock Lawyers Help? 

Seeking legal assistance does not mean you cannot perform your role. Instead, it provides legal guidance on all aspects of the estate administration and legal advice on matters that require careful consideration to ensure that you fulfil your legal obligations to the Estate and its beneficiaries. This helps minimise the risks of claims against you of which you can be held personally liable. If you require assistance with any aspect of a deceased estate, contact our friendly and experienced team today.