Final tax return with the ATO

The executor lodges a final individual tax return for the deceased covering 1 July to the date of death. This is called a "date of death return." It includes all normal income — wages, interest, dividends, super pension payments.

If the estate or beneficiary sells the deceased's main residence within 2 years of death, it is generally CGT-exempt — even if it was not the beneficiary's home. After 2 years, CGT may apply unless it became the beneficiary's own main residence.

Investment properties and shares may attract capital gains tax when sold. Assets acquired before 20 September 1985 have different cost base rules. An accountant can help navigate this.

Super death benefits have three components: a tax-free component (always tax-free to everyone), a taxed element, and an untaxed element. How much tax is paid depends on who receives it:

• Tax dependant (spouse, child under 18, financial dependant, interdependency relationship) — generally receives the entire benefit tax-free.
• Non-tax dependant (typically an adult child) — the taxed element is taxed at 15% + 2% Medicare levy. The untaxed element is taxed at 30% + 2% Medicare levy. The tax-free component is always tax-free.

This is one of the biggest surprises in estate planning. An adult child inheriting a parent's super can lose a significant portion to tax. A financial adviser can help structure nominations to minimise this.

An accountant who specialises in deceased estates is almost always worth the fee. They know the ATO's requirements, the exemptions, and the traps. The fee is paid from the estate. The ATO's Deceased Estates line is 13 28 61.