Final Tax Return After Death: What the ATO Requires From Executors

The executor's tax obligations don't end with the funeral. The ATO requires at least one — and sometimes two — tax returns for the deceased, plus ongoing returns for the estate itself if administration takes more than one financial year.

Getting these returns wrong can result in penalties, delayed distribution to beneficiaries, or personal liability for the executor. Here's the sequence that matters.

The Date-of-Death Return

The executor must lodge a final individual tax return for the deceased covering the period from 1 July of the current financial year to the date of death. This is called the "date-of-death return."

What to include:

• Salary, wages, and any employer termination payments up to the date of death
• Pension or annuity payments received before death
• Interest earned on bank accounts up to the date of death (request statements from each bank)
• Dividends declared before the date of death
• Rental income received up to the date of death
• Capital gains on assets disposed of before death

What to exclude:

• Income earned by the estate after the date of death — this goes on the estate's tax return
• Superannuation death benefits paid to dependants (these are generally tax-free for tax dependants, or taxed separately through the super fund's PAYG system for non-dependants)

The deadline: The date-of-death return is due by the standard lodgement deadline. If the person died between 1 July and 31 October, the return for the prior financial year is also due by 31 October (or later if you're using a registered tax agent).

To lodge, you need to contact the ATO on 13 28 61 and register as the deceased's authorised representative. They'll update their records and give you access to lodge through a tax agent or by paper.

Medicare Levy and the Deceased

The Medicare levy is calculated on a daily basis for the period the deceased was alive during the financial year. If the person died on 15 September, the levy applies for 77 days, not the full year.

If the deceased held valid private health insurance at the date of death, the Medicare levy surcharge does not apply for the covered period. Request a statement from the health insurer confirming the date coverage ceased.

Estate Income Tax Returns

If the estate earns income after the date of death — interest on bank accounts, rent from property, dividends from shares — the executor must lodge a trust tax return for the estate (not an individual return).

The estate needs its own Tax File Number (TFN). Apply using form NAT 3799 — the ATO typically processes estate TFN applications within 28 days.

Estate income is generally taxed at individual marginal rates for the first three years of administration. After three years, the estate loses this concession and is taxed at the top marginal rate (45% plus Medicare levy) on every dollar above the tax-free threshold.

This three-year rule creates a real incentive to finalise estate administration promptly — which also aligns with the SRO's three-year land tax concessionary period in Victoria.

Capital Gains Tax on Death

Assets transferred from the deceased to beneficiaries are generally not subject to CGT at the time of death. Instead, the beneficiary inherits the deceased's cost base — the CGT liability is deferred until the beneficiary eventually sells the asset.

Exceptions include assets transferred to tax-exempt entities (charities, super funds) and the deceased's main residence if it becomes a rental property in the beneficiary's hands.

For the main residence, a special rule applies: if the beneficiary sells the property within two years of the date of death, and the property was the deceased's main residence at the time of death, the sale is completely CGT-free regardless of the property's value.

Victoria-Specific Tax Interactions

For Victorian estates, the tax return sequence interacts with two state-level obligations that can compound the overall tax burden:

SRO Land Tax. If the estate holds property, the executor must lodge form LTX-Trust-18 with the State Revenue Office within one month of the grant of probate. During the concessionary period (up to three years from death), the property is taxed at general rates. After three years — or if the form isn't lodged — trust surcharge rates apply, which can be double the general rate.

Stamp Duty on Transfers. Section 42 of the Duties Act 2000 exempts deceased estate transfers from stamp duty, but the SRO has moved to treat assumed tax liabilities (such as a beneficiary agreeing to pay outstanding land tax) as "dutiable consideration." This means what should be a duty-free transfer of the family home can unexpectedly trigger a stamp duty bill.

The interaction between ATO and SRO obligations means executors effectively run two tax clocks simultaneously. The ATO's three-year concessional tax rate for estates and the SRO's three-year land tax concessionary period create a shared deadline that defines the outer boundary of efficient estate administration.

Tax Clearance Before Distribution

Before distributing the estate to beneficiaries, the executor should obtain a release notice from the ATO confirming all tax obligations have been met. Without this, if the ATO later discovers an outstanding liability, the executor can be held personally liable for tax debts — even after the estate funds have been distributed.

Request a release by lodging all outstanding returns and contacting the ATO's deceased estate team. Processing takes 2-4 weeks for straightforward estates.

The executor should also confirm all SRO obligations are cleared before distributing Victorian property — a tax clearance from the ATO doesn't cover state revenue liabilities.

The Victoria Survivor Benefits Navigator includes a tax compliance timeline that maps every ATO obligation alongside your Centrelink and SRO deadlines, so nothing falls through the cracks.

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