Estate Executors - Know Your Tax Obligations
Rockliffs Solicitors and IP Lawyers
Publish Date: August 9, 2010
Agreeing to be executor of an estate means accepting obligations to the tax office.
As executor you are answerable as the taxpayer in respect of all an estate's income and for paying tax on it. You will have to lodge returns which are the same as practicable as the deceased person would have been liable to make.
An estate's tax return is prepared as if it were an individual. But except for capital gains tax, the estate does not inherit the tax profile of the deceased. For example, if a person had tax losses, including a capital gains tax loss, the availability of those tax losses would die with them.
If the deceased had acquired an asset before the start of capital gains tax on 20 September 1985, any capital asset disposed of by the executor will be deemed to have been acquired by the estate at its value at the time of death.
This means that if an asset has increased in value since the date of death, a capital gain might be realised. On the other hand, a loss could be realised if the value of the asset has diminished since the date of death.
The tax office can release a taxpayer from paying tax if the dependants of the deceased individual would suffer serious hardship were the executor required to pay a tax liability.
However, once an estate is fully administered, its beneficiaries will be taxed in their own right on their share of the estate's income, which can itself be a problematic issue.
Reproduced with the permission of the Law Society of New South Wales.
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