IRD Estate Tax Return NZ: IR596, IR6, and What You Actually Need to File

IRD obligations are one of the most overlooked parts of estate administration in New Zealand. Most people know to notify the bank. Many don't realise there are up to three separate tax obligations to manage — and that getting them wrong can delay distribution and create penalties that come from the estate.

Here's what actually needs to happen.

Three Separate Tax Tasks

When someone dies, there are potentially three distinct IRD matters:

1. Final personal tax return — the deceased's last income tax return, from 1 April to the date of death
2. Estate IRD number — a new IRD number registered for the estate as a separate taxpaying entity
3. Estate income tax return (IR6) — if the estate earns income while being administered, it needs to be reported

Many executors only know about the first one and miss the other two entirely.

Step 1: Notify IRD of the Death

Before anything else, notify IRD that the person has died. You can do this by calling IRD on 0800 227 774 or writing to them. Have the deceased's IRD number and date of death ready.

IRD will:

• Stop any tax obligations in the deceased's name going forward
• Flag their account so the estate can take over income reporting
• Advise on outstanding obligations

Do this early. IRD processing times can be several weeks, and you want no surprises when you're ready to file.

Step 2: Get an IRD Number for the Estate

The estate is a separate legal entity from the person who died. Once someone passes, any income earned by their assets — interest on bank accounts, rental income, dividends from investments — belongs to the estate, not to the person.

To report this income correctly, you need a new IRD number registered in the estate's name.

Form IR596 is used to register as a new taxpayer. When completing this form:

• Categorise the entity as Trust/Estate (not individual, company, or partnership)
• Use the estate's name as it appears in the will (e.g., "The Estate of [Name]")
• Name the executor as the contact person

You can download IR596 from the IRD website. Submit it by post or visit an IRD office.

Once IRD processes the application (typically 10-15 working days), they'll issue a new IRD number for the estate. Open a dedicated bank account in the estate's name using this number.

Step 3: File the Final Personal Tax Return

This covers the deceased's personal income from 1 April to the date of death in the same tax year.

If the person had straightforward employment income, IRD may auto-calculate this using their information exchange systems. But if they had:

• Rental income
• Business income
• Investments paying interest or dividends
• Multiple income sources

...you'll need to file a full IR3 (individual return) for that period.

The executor files this return on behalf of the deceased. Use the deceased's personal IRD number, not the estate's.

Any tax refund due goes to the estate. Any tax owing is paid from the estate before distribution to beneficiaries.

Tip: Contact IRD to request a statement of account and any pre-populated income information. They can tell you what's already on record and what you need to add.

Step 4: File Estate Tax Returns (IR6)

From the date of death until the estate is fully distributed, any income earned by estate assets is reported using the IR6 estate return.

This applies if the estate holds income-earning assets during administration:

• Bank accounts earning interest
• Rental property earning rent
• Shares paying dividends
• Term deposits maturing

If the estate is wound up quickly (within the same tax year), income may be minimal. If administration drags on — and it often does — the estate may need to file one or more IR6 returns.

IR6 returns are filed annually for the estate's tax year. The estate's tax year runs from 1 April to 31 March, same as the personal tax year.

Tax rates for estates are the same as trusts: a flat 33% on taxable income, or the beneficiary's marginal rate if income is distributed to beneficiaries in the same year.

Practical Timeline

Here's how the IRD tasks map to the broader estate administration process:

IRD Clearance Before Distribution

You are not strictly required by law to get IRD's written clearance before distributing the estate, but it's prudent practice. If IRD later raises a tax assessment against the estate after you've distributed the funds, you may be personally liable as executor for unpaid tax.

Some solicitors recommend requesting a formal tax clearance from IRD before final distribution, particularly for larger estates. IRD has a process for this — ask them directly when the final return is ready to file.

Common Mistakes

Only filing the final personal return and ignoring the estate IRD number. If the estate takes 12 months to administer and the bank account earns interest throughout, that income is unreported. IRD will eventually match it.

Using the deceased's personal IRD number for estate income. The deceased's number should only be used for their personal income up to the date of death. Estate income needs the estate's IRD number.

Missing the annual filing deadline for IR6. Estate returns are due the same date as other tax returns. Late filing penalties apply even for estates.

Confusing tax obligations with benefits entitlements. IRD obligations and survivor benefit eligibility are separate tracks. If you're the surviving spouse working through benefit claims, benefit income is separate from estate income and needs to be reported on your personal return.

The full picture of what happens at the intersection of estate administration and your own financial situation as a surviving spouse — including how inheritance affects your benefit eligibility and the asset testing thresholds that apply — is covered in the NZ Survivor Benefits guide.

Getting Help

IRD has a dedicated team for deceased estates. Their general line is 0800 227 774. They are generally helpful when you explain you're the executor trying to get things right.

For complex situations — business income, overseas assets, multiple investment portfolios — an accountant is worth engaging. Accountant fees for estate tax work typically run $500-$2,000 depending on complexity and are paid from the estate.

Keep every document. IRD has up to four years to raise assessments after the end of the relevant tax year. Hold estate records until at least that window has passed after final distribution.

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