au-deceased-estates

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# Australia Deceased Estates -- Date-of-Death Returns, Estate Trust Returns & Death CGT Skill v1.0

## Australia Deceased Estates -- Date-of-Death Returns, Estate Trust Returns & Death CGT Skill v1.0

> **General reference only.** This skill is general tax/accounting reference material for AI-assisted workflows. It has not been reviewed for any specific person's facts, documents, elections, deadlines, residency, filing status, or local procedures. Do not rely on it to file, pay, amend, or take a tax position without review by a qualified professional in the relevant jurisdiction.

> **Law-change context (three live fronts, verified 20 August 2026).** (1) The enacted individual rate cut (16% -> 15% from 1 July 2026, -> 14% from 1 July 2027) flows into date-of-death returns and the first-3-years concessional estate rates for 2026-27; the ATO's published year-4+ compressed bands are current only to 2025-26 -- see Rule 5. (2) Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (Royal Assent 26 June 2026): from 1 July 2027 the 50% CGT discount is replaced by cost base indexation plus a 30% minimum rate on capital gains, and pre-CGT (pre-20 September 1985) status ends after 30 June 2027 -- this is LAW and interacts with Div 128 legatee cost bases (Rule 14). (3) The announced 30% minimum tax on discretionary trust distributions from 1 July 2028 explicitly CARVES OUT testamentary trusts and deceased estates -- ANNOUNCED, NOT LAW (Rule 13). Verify all three before relying.

## Section 1 -- Quick reference

**Read this whole section before computing or classifying anything.**

**Quick reference**

| Field | Value |
| --- | --- |
| Country | Australia |
| Primary Legislation | ITAA 1936 Part III Div 6 (ss 95-99A), s 101A, Div 6AA & s 102AG; ITAA 1997 Div 128, Subdiv 118-B (s 118-195), s 104-215 (CGT event K3), Div 302 |
| Tax Authority | Australian Taxation Office (ATO) |
| Income Year | 2026-27 (1 July 2026 -- 30 June 2027); lodgment season for 2025-26 |
| Date-of-death (final) return | 1 July to date of death; FULL tax-free threshold (not pro-rated); Medicare levy applies as for a normal individual year; paper form or via appointed tax agent -- never myTax |
| If no final return needed | Non-lodgment advice marked 'DECEASED' + date of death |
| Estate trust returns | LPR/executor is "trustee" (s 6(1) ITAA 1936); estate needs its OWN TFN; first income year = day after death to 30 June |
| Estate years 1-3 (s 99) | Resident individual rates WITH full $18,200 tax-free threshold; NO Medicare levy; NO tax offsets (no LITO) |
| Estate year 4+ (s 99) | Compressed bands -- threshold collapses to $416 (2025-26: $417-$611 at 50% of excess; $612-$45,000 at $97.76 + 16% of excess over $611, whole amount taxed from $0 once over $611) |
| Death and CGT | NOT a CGT event where the asset passes to the LPR or a beneficiary (Div 128 rollover); K3 override for exempt entities, super funds and foreign-resident beneficiaries |
| Inherited main residence | Full exemption if contract settles within 2 years of death (s 118-195); PCG 2019/5 automatic safe harbour extension up to 18 months |
| Super death benefit via LPR | Fund withholds NIL; trustee taxed on the share expected to benefit non-dependants at up to 15% (taxed element) / 30% (untaxed) with NO Medicare levy |
| Losses | Carried-forward revenue AND capital losses die with the deceased -- no transfer to the estate or beneficiaries |
| Contributor | Open Accountants |

**Conservative defaults:**

**Conservative defaults**

| Ambiguity | Default |
| --- | --- |
| Probate status unknown | Treat administration as INCOMPLETE -- no present entitlement; trustee assessed |
| Administration completion date unverified | Assume not complete; s 99 trustee assessment, not beneficiary returns |
| Which estate income year unclear | Count income years from the day after death (a part-year counts as year 1); assume year 4+ compressed bands until the count is proven |
| Beneficiary residency unknown | Assume foreign resident -- screen every in-specie asset for CGT event K3 and trustee assessment exposure |
| Dwelling's status at death unknown | Assume NOT the deceased's main residence and NOT pre-CGT -- no s 118-195 exemption until evidenced |
| 2-year window missed, extension claimed | Assume PCG 2019/5 conditions NOT met until each of the 5 conditions is documented |
| Super death benefit recipient's dependancy unknown | Assume NON-dependant for tax purposes (adult child default) -- 15%/30% exposure |
| Asset history unsighted | Assume post-CGT asset at the deceased's (unknown) cost base -- obtain records before computing anything |
| Testamentary trust asset provenance unknown | Assume s 102AG(2AA) NOT satisfied -- minors' penalty rates until will-derivation is traced |
| Pre-death income received post-death | Income of the ESTATE (s 101A), not the final return |

## Section 2 -- Required inputs and refusal catalogue

### Required inputs

**Minimum viable** -- death certificate date, the will (or intestacy position), probate/letters of administration status and date, income records straddling death, prior-year lodgment history, asset schedule with acquisition dates and cost bases, beneficiary list with residency/age.

**Recommended** -- ATO deceased estate data package (3 years of returns, income data, NOAs, debts, super accounts), estate bank statements by administration stage, dwelling occupancy history, super fund death benefit statements with component breakdown, distribution history.

**Ideal** -- solicitor's administration timeline (debts paid/provided for), evidence of the date administration completed, valuations at date of death (pre-CGT assets and main residence), BDBN documents, testamentary trust deed with asset provenance trace.

### Refusal catalogue

- **R-AU-DE-1 -- Probate and estate legal advice** — *Trigger:* grant applications, will interpretation, executor appointment/removal, executor duties disputes, intestacy entitlements. *Message:* "Probate and estate administration are legal practice, not tax. Engage an estates lawyer; this skill resumes once the LPR's authority and the administration timeline are documented."
- **R-AU-DE-2 -- Family provision claims** — *Trigger:* a family provision / testator's family maintenance claim (actual or threatened), or distributions being delayed by one. *Message:* "Family provision claims change who takes what and can reopen the CGT and s 118-195 analysis. Legal matter -- flag the tax consequences of any settlement to the estate lawyer and escalate."
- **R-AU-DE-3 -- Super death benefit disputes** — *Trigger:* contested trustee discretion, claim-staking objections, AFCA complaints, BDBN validity challenges. *Message:* "Death benefit payment disputes are superannuation law and fund-rules territory. Out of scope beyond the tax treatment of whatever is ultimately paid. Escalate."
- **R-AU-DE-4 -- Foreign estates and non-resident parties beyond flagging** — *Trigger:* non-resident deceased, foreign LPR, estate administered offshore, Australian beneficiary of a FOREIGN estate (s 99B exposure), treaty questions. *Message:* "This skill only FLAGS non-resident issues (K3, trustee assessment under s 98, s 99B on foreign-estate distributions). Computation and treaty analysis are out of scope. Escalate before any distribution."
- **R-AU-DE-5 -- Insolvent estates** — *Trigger:* estate liabilities exceed assets, Part XI Bankruptcy Act administration, creditor priority questions. *Message:* "Insolvent estate administration has its own priority and personal-liability regime for the LPR. Out of scope. Escalate to an insolvency practitioner and estates lawyer."
- **R-AU-DE-6 -- Testamentary trust drafting and structuring** — *Trigger:* requests to design, draft or amend testamentary trust terms, or to plan will structures around the announced minimum tax. *Message:* "Testamentary trust drafting is legal work, and structuring around announced-not-law measures is premature. This skill covers only the tax treatment of an EXISTING testamentary trust. Escalate."

## Section 3 -- Administration timeline and estate-year decision tables

### 3.1 Stages of administration (IT 2622) -- who is assessed

**Stages of administration**  _(IT 2622)_

| Stage | Facts | Present entitlement? | Assessed to | Rate |
| --- | --- | --- | --- | --- |
| 0. Death | Final individual return, 1 July to date of death | n/a | Deceased (LPR lodges) | Individual rates, full threshold, Medicare levy |
| 1. Initial (to grant of probate/LoA) | Debts unquantified; *Whiting*: no beneficiary can be presently entitled | NO | Trustee, s 99 | Estate rates (3.2) |
| 2. Intermediate (grant to residue ascertained) | Trustee MAY pay interim distributions if remainder clearly covers liabilities | Only to amounts ACTUALLY PAID to (or applied for) a beneficiary | Beneficiary s 97 (or trustee s 98 for minors/non-residents) on paid amounts; trustee s 99 on the rest | Beneficiary marginal / estate rates |
| 3. Final (debts paid or provided for; residue ascertained) | Administration complete -- even if transfers not yet executed | YES -- residuary beneficiaries presently entitled | Beneficiaries s 97; trustee s 98 for legal-disability/non-resident beneficiaries | Beneficiary marginal rates |
| Completion-year practice | Administration completes mid-year | ATO practice (IT 2622 paras 17-19) | Beneficiaries assessed on their share of the FULL year's net income; OR apportion (pre-completion income to trustee, post-completion to beneficiaries) if actual derivation is evidenced AND apportionment is requested | Mixed |

### 3.2 Estate trustee rates (s 99), no present entitlement

**Estate trustee rates (s 99)**  _(s 99; QC 49909)_

| Estate income year | Rates |
| --- | --- |
| Years 1-3 (year 1 = day after death to 30 June) | Resident individual rates + FULL $18,200 threshold; NO Medicare levy; NO offsets (no LITO); applied for in the first trust return; cannot be extended past year 3 |
| Year 4 onwards (2024-25 and 2025-26 published table) | $0-$416 nil; $417-$611 50% of excess over $416; $612-$45,000 $97.76 + 16% of excess over $611 (once over $611 the WHOLE amount is effectively taxed at 16%); $45,001-$135,000 $7,200 + 30%; $135,001-$190,000 $34,200 + 37%; $190,001+ $54,550 + 45%. NO Medicare levy |
| Year 4 onwards, 2026-27 | 16% -> 15% rate cut is LAW; ATO has not yet republished the compressed band boundaries (the $611/$97.76 shade-in constants derive from the 16% rate and will change) -- verify QC 49909 before lodging any 2026-27 estate return |

The year-4+ compression is deliberate anti-prolongation policy: parking income in a long-running estate stops being concessional after three years, so there is no rate incentive to leave administration open. s 99A (47% flat) is the default for trusts generally; resident deceased estates get s 99 treatment in practice unless property has been injected into the estate or the Commissioner otherwise considers s 99A appropriate (s 99A(2) factors).

### 3.3 First-90-days checklist (LPR tax workflow)

**First-90-days checklist**  _(PCG 2018/4)_

| Step | Detail |
| --- | --- |
| Notify the ATO of the death | Australian Death Notification Service or ATO notification form; the deceased's agent links are SEVERED on death -- the former tax agent has no authority |
| Establish authority | Grant of probate / letters of administration -> become the "authorised LPR" on ATO records; an executor WITHOUT a grant is not an authorised LPR |
| Get the data package | 3 years of returns, income/investment data, NOAs, statement of account, ATO debts, super accounts, current-year payroll -- issued to the authorised LPR or their appointed agent |
| Estate TFN | Apply for a NEW TFN for the estate trust; never lodge trust returns under the deceased's TFN |
| Final return | Lodge if tax was withheld, taxable income exceeded the threshold, or returns were lodged/outstanding in prior years; else non-lodgment advice marked 'DECEASED' + date of death; paper form headed 'LEGAL REPRESENTATIVE OF [name] (DECEASED)' |
| Outstanding prior years | Lodge any outstanding pre-death returns |
| Provide for tax before distributing | The LPR is personally liable (up to the value of estate assets) for tax not provided for -- PCG 2018/4 sets out the ATO's practical liability approach and notification/waiting safe harbour |

## Section 4 -- Worked examples (2025-26 rates -- the year being lodged)

### Example 1 -- Final return: part-year income, full threshold, franking refund

Leo died 31 October 2025. Salary to date of death $48,000 (PAYG withheld $9,000); fully franked dividend $1,400 (franking credit $600) paid 15 October 2025. Taxable income = 48,000 + 1,400 + 600 = **$50,000**.

Tax at 2025-26 resident rates with the FULL threshold (never pro-rated for a part year): 16% x (45,000 − 18,200) = $4,288; + 30% x (50,000 − 45,000) = $1,500 -> $5,788. LITO applies (this is an ordinary individual return, unlike the estate assessments in Rule 4): $325 − 1.5% x (50,000 − 45,000) = $250, so $5,538. Medicare levy 2% x 50,000 = $1,000. Less franking offset $600 (refundable in a final return). Net $5,938; withheld $9,000 -> **refund $3,062**, released to the authorised LPR. Four months of income against a full-year threshold and withholding scales makes a refund the normal outcome -- lodge even when marginal. The November salary run and any dividends paid after 31 October are NOT in this return: they are estate income (Rule 10).

### Example 2 -- Estate year 2: s 99 concessional assessment

Leo's estate (year 1 was 1 November 2025 - 30 June 2026) derives net income of $30,000 in 2026-27 (year 2); administration incomplete, nothing paid out. No beneficiary is presently entitled -> trustee assessed under s 99 at individual rates with the full threshold and NO Medicare levy. At 2025-26 rates: 16% x (30,000 − 18,200) = **$1,888.00**. (For the actual 2026-27 assessment the enacted 15% rate gives 15% x 11,800 = $1,770.00 -- confirm the ATO 2026-27 tables at lodgment.) No LITO: a living individual on $30,000 would pay less after offsets; estates get rates and threshold only.

From openaccountants/openaccountants, AGPL-3.0.

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