10 Steps To Navigating A Deceased Loved One’s Tax Obligation

First and foremost, your well-being is the most important thing right now.

It’s okay to take a step back and breathe. If you’re feeling overwhelmed, reach out to friends or family, or consider talking to someone through a confidential counselling service.

Tax is likely the last thing on your mind. You can pause any tax-related correspondence by contacting the ATO to inform them that your loved one has passed.

When you’re ready, the first step in managing your loved one’s financial affairs is determining who will take on this responsibility. If there’s a will naming an executor, this person typically manages the estate. Without a will, the next of kin may step into this role.

Finalising a deceased estate can take time (usually between 6 and 12 months), but settling any tax obligations before distributing the estate’s assets is important.

If managing your loved one’s tax affairs feels daunting, don’t hesitate to seek help. A registered tax agent, like us, or the ATO can guide you through the necessary steps. You might also find helpful information through Services Australia or your state’s supreme court or public trustee websites, especially if you need advice on more complex matters like contesting a will or applying for probate.

In some cases, you may need to apply for a grant of probate or letters of administration to manage the deceased’s estate. These court-issued documents give you full authority to handle the estate’s tax affairs and access relevant information.

However, for smaller estates, this might not be necessary. It’s always good to check with the ATO or a legal professional to understand what’s required in your situation.

Once you’ve taken on the role of managing the estate, notify the ATO. This helps ensure that all tax records are updated and that you have the authority to handle any outstanding tax matters.

If your loved one was involved in a business, whether as a sole trader or partner, there are additional steps to take. You may need to lodge a final Business Activity Statement (BAS) and handle any other outstanding tax returns. Depending on the business structure, you may also need to seek advice on how the partnership or business will be managed moving forward.

One of the key tasks is to lodge a final tax return for your loved one, known as a “date of death” tax return. This covers the income year up to the date they passed away. If there are any outstanding tax returns from previous years, these will need to be lodged as well.

While there are no inheritance taxes in Australia, the deceased estate may generate income, such as rental income or dividends from shares. In this case, you’ll need to lodge trust tax returns for the estate until it’s finalised.

Before distributing the estate’s assets to beneficiaries, ensure all tax obligations are fully settled. As the legal personal representative, you are responsible for paying any outstanding tax liabilities from the estate’s assets. Failing to do so could make you personally liable, so it’s important to double-check everything before making the final distribution.

Managing the tax obligations after losing a loved one is never easy, but remember that help is available every step of the way.

Take your time, seek support when needed, and focus on what matters the most—taking care of yourself and honouring your loved one’s memory. We are always here to help you if needed.