Tax and deceased estates
Deceased estates are the property and assets of a person who has died. This can include:
- real estate
- money in bank accounts
- personal possessions.
Assets that are jointly owned may or may not be part of the estate. Some assets will not be included because the deceased person has made other arrangements to distribute them.
Similarly, superannuation and life insurance may not be part of a deceased estate. Policies can be arranged so that payments go directly to the beneficiaries after a person's death.
Wills and beneficiaries
Beneficiaries are the people who share in the deceased estate. They may be required to pay some taxes. This depends on what the beneficiaries receive from the estate and their relationship to the deceased person.
Beneficiaries are usually named in the will. In Queensland if a person dies without a will their assets are distributed according to the Queensland Government's Succession Act 1981. Generally this means the estate passes to the deceased person's next of kin. However, it may take more time and money to finalise the estate.
Read more about wills and estate planning.
An executor is the person appointed by the deceased person to administer their will. An executor cannot distribute the deceased estate until the debts and taxes have been determined.
An executor's job can be complex. It includes:
- informing banks etc. of the death
- locating assets and assessing their value
- paying debts, income tax and funeral expenses
- distributing the surplus to beneficiaries.
Both federal and state tax may apply to the property and assets of a deceased person.
Capital gains tax may apply to the sale of some assets in a deceased estate.
A capital gain is the difference between what it cost to acquire an asset and the payment received when the asset is sold.
If you inherit a dwelling as part of a deceased estate, you may be exempt (or partially exempt) from capital gains tax if you sell the property.
Superannuation death benefits
If you receive a superannuation death benefit what (if any) tax you pay depends on:
- whether you are a dependant of the deceased person
- whether the benefit is paid as a lump sum or as a superannuation income stream
- the tax-free and taxable components of the payment.
Read more about tax on superannuation benefits.
Death benefit payments
A death benefit termination payment can be complicated. The Australian Taxation Office recommends that you seek professional advice if you receive such a payment.
Tax on a deceased estate's income
Tax may be payable on the income from a deceased estate.
This will depend on many factors including whether the beneficiaries are presently entitled to the income and when the income is received.
Land tax may apply to land held in a deceased estate. Land tax is subject to the total value of freehold land owned exceeding the relevant threshold, ownership and eligibility for exemptions.
Transfer (stamp) duty applies to the transfer of property from an executor. An exemption may be available where the executor is transferring the land to reflect a beneficiary’s interest under the will.