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

Losing someone close to you is one of the most difficult experiences in life. During such times, dealing with practical matters like tax can feel overwhelming. But remember, you don't have to handle everything at once, and you certainly don’t have to do it alone.

Here’s a gentle guide to help you navigate the tax obligations that come after the death of a loved one.

1. Look after yourself first

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.

2. Pause tax correspondence

Tax matters are likely the last thing on your mind. You can pause any tax-related correspondence by contacting the Australian Taxation Office (ATO) to notify them of your loved one’s passing.

3. Decide who will manage the estate

When you’re ready, the first step in managing your loved one’s financial affairs is to determine who will take on this responsibility. If there’s a will, the nominated executor typically manages the estate. If there’s no will, the next of kin usually assumes this role.

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

4. Don’t hesitate to seek help

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.

5. Understand probate and letters of administration

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 the legal authority to access financial records and handle tax matters.

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.

6. Notify the ATO about managing the estate

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.

7. Handling business tax obligations

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)
• Complete outstanding tax returns
• Seek advice on how to manage or wind down the business.

Business structures can vary, so it’s wise to consult a professional.

8. Lodge the final tax return

One of your key responsibilities will be lodging a final tax return for your loved one, referred to as a “date of death” tax return.

This return covers the income year up to the date of death. You’ll also need to lodge any outstanding tax returns from previous years.

9. Lodge tax returns for the estate

While there is no inheritance tax in Australia, a deceased estate may continue to earn income, such as rent or dividends from shares.

In this case, you’ll need to lodge trust tax returns on behalf of the estate until it is fully administered.

10. Finalise tax affairs before distributing the estate

Before distributing any assets to beneficiaries, ensure all tax obligations are fully settled.

As the legal personal representative, you are responsible for paying any tax debts from the estate. Failing to do so could make you personally liable, so it’s important to double-check everything before making the final distribution.