Final Tax Return and ATO Clearance After Death in Australia

Tax doesn't stop at death — it just changes form. As executor, you take on the obligation to lodge the deceased's final individual tax return and, if the estate earns income during the administration period, to register the estate as a separate taxpayer and lodge trust tax returns on its behalf. Missing these obligations doesn't just create penalties; it can prevent you from legally closing the estate.

The final individual tax return

The final individual income tax return covers the period from 1 July of the last financial year to the date of death. It reports all income the deceased earned while alive: salary, rental income, share dividends, interest, and any capital gains realised before death.

The executor lodges this return on behalf of the deceased. You'll need:

• The deceased's Tax File Number (TFN)
• Income summaries from employers, banks, and investment platforms (ATO pre-fill data is available via myGov or a tax agent)
• Details of any capital assets sold before death

Due date: If the deceased died between 1 July and 31 October, the return is due 31 October. If they died after 31 October, you generally have until the end of the following February or later — but it's worth confirming the exact date with the ATO given the estate's circumstances. A registered tax agent can obtain an extension if needed.

The ATO will assess the return and either issue a refund (paid to the estate) or a tax debt (which becomes a liability of the estate, payable before any distribution to beneficiaries).

The estate's own TFN and tax returns

Once the deceased's date-of-death return is lodged, the picture changes. Any income generated by the estate's assets during the administration period — rent from an investment property, dividends from shares, interest on estate bank accounts — is income of the estate, not income of the deceased.

For tax purposes, a deceased estate is treated as a trust. The executor must:

1. Apply for an estate TFN — this is separate from the deceased's personal TFN. Apply via the ATO's business portal or through a tax agent. You'll need the Grant of Probate or Letters of Administration as evidence of authority.

2. Lodge trust tax returns (form TRT) for each financial year in which the estate earns income. If the estate is administered across multiple financial years — which is common — you may need to lodge more than one trust return.

3. Manage capital gains tax (CGT) on assets sold during administration. CGT applies to deceased estates, though some concessions apply depending on the asset type, when the deceased acquired it, and whether it's transferred to a beneficiary or sold.

ATO clearance: what it is and when you need it

An ATO clearance confirmation is not a formal certificate that the ATO issues routinely. Rather, before making any distributions, an executor should satisfy themselves that all tax obligations have been met:

• The deceased's final individual return has been assessed and any liability paid
• All estate trust returns have been lodged and assessed
• Any outstanding PAYG withholding, GST (if the deceased ran a business), or other tax debts have been settled

The ATO may issue a "Notice of Assessment" for each return, confirming the amount owing or the refund amount. Once all assessments are finalised and balances settled, the executor has effectively obtained the clearance they need to distribute safely.

For larger or more complex estates, some accountants recommend proactively requesting a letter from the ATO confirming no further amounts are owing before final distributions are made. This provides an additional layer of protection against post-distribution tax assessments.

Capital gains tax on estate assets

CGT is an area where ACT executors frequently need professional input. Key points:

• Inherited property transferred to a beneficiary as a main residence is generally CGT-exempt if the deceased used it as their main residence and it's transferred to a beneficiary within two years of death.
• Property that was an investment property or held for other purposes does not qualify for the main residence exemption. CGT will apply based on the difference between the cost base (often the deceased's original purchase price) and the sale price.
• Pre-CGT assets (acquired before 20 September 1985) may be CGT-free depending on when they are sold and by whom.

CGT on estate assets is complex enough that most executors who deal with investment properties or large share portfolios should engage a tax professional.

Tax returns and the distribution timeline

The ATO's processing times add to the estate's overall timeline. It typically takes 6–12 weeks for individual returns to be assessed after lodgement, and trust returns may take longer.

Factor tax obligations into your estate administration timeline: file the final individual return promptly, register for an estate TFN as soon as probate is obtained, and lodge trust returns as soon as each financial year ends. Delays in lodging returns create delays in finalising the estate — and keep beneficiaries waiting longer.

The ACT Estate Settlement Guide includes a step-by-step tax checklist for ACT estates, covering the timing of each ATO obligation and what information to gather before lodging each return.

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