The passing of a loved one, is often a difficult and emotionally challenging time, made even more complex when the death occurs unexpectedly. Executors and beneficiaries are frequently left to manage unresolved matters and navigate difficult decisions, which can lead to disputes between family members, friends or even business partners over the distribution of assets. This is where AR & B Advisors can help, easing the burden and guiding you through the intricacies of deceased estate administration, including tax obligations and the financial implications of the choices made.   

‘Deceased estate administration is a detailed process that requires time and careful attention,’ says AR & B Advisors Principal, Jason Barbetti. ‘The more complex the estate, such as deceased individuals that were involved in business, trusts, self-managed super funds or who had significant assets, it can take longer to finalise, often stretching over months or even years.’ 

When should you seek professional advice? 

The size and value of a deceased’s estate can add to the complexity of finalising the estate. This is further complicated, depending on the terms of the will and any family issues that may exist. When dealing with a complex estate, seeking advice from a professional such as a lawyer or accountant, can help to ensure that the estate considers both legal and financial matters. A complex estate may involve: 

• The deceased owned a business, company, trust or self-managed super fund 

• The estate has significant assets or liabilities (these may be held internationally) 

• The estate may be insolvent or involves superannuation benefits or life insurance proceeds 

• There is no valid Will or the Will is unclear, complex or improperly signed 

• The estate includes ongoing trusts or is likely to cause family disputes 

• The deceased was not an Australian resident or a beneficiary challenges the Will’s validity.  

Administering a deceased estate 

One of the first steps you will need to take is to determine if there is a Will and if there is an Executor either appointed by the Will, or if no Will exists, the court will appoint an Administrator to oversee finalising the estate. It is the role of the Executor or Administrator to obtain a Grant of Probate or Letters of Administration, which legally authorises them to manage the estate’s assets and liabilities. 
 
Once probate is secured, the focus shifts to identifying the estate’s financial position. This involves: 

• Locating and valuing a comprehensive list of assets (e.g., real estate, shares, superannuation) and liabilities. 

• Arranging for the closure of bank accounts. 

• Notifying relevant authorities, such as the Australian Taxation Office (ATO) and Centrelink, about the deceased’s passing. 

• Paying debts and income tax. 

• Managing the deceased person’s tax affairs.  

It's important to note that the laws relating to a deceased person’s assets and income differ based on the state or territory in which they resided at the time of their passing. 

Tax implications for deceased estates 

When a person passes away, their tax obligations do not instantly cease. It becomes the role of the Executor or Administrator to ensure that these obligations are met by lodging a final tax return, which accounts for income earned up to the date of death, including wages, dividends, and rental income. If the estate generates income after the date of death, which may include rental income or interest on investments, then a separate tax return may be required for the estate itself. Additionally, the transfer or sale of estate assets can trigger capital gains tax (CGT) events, and the timing of these transactions may impact the tax outcome. Superannuation death benefits can also carry tax consequences depending on the beneficiary’s relationship to the deceased and the benefit structure.  

‘The tax requirements for deceased estates can be intricate,’ says Jason. ‘Executors often face challenges with final tax returns, capital gains and superannuation. Seeking timely and accurate advice from a professional can help to prevent costly mistakes and unnecessary liabilities in the process.’ 

Property and Real Estate 

Real estate often represents a significant portion of a deceased estate, and decisions regarding its sale or transfer carry notable tax implications. Executors and beneficiaries should be aware of the following: 

• Primary residence exemption - If the deceased’s primary residence is sold within two years of their passing, the sale is generally exempt from CGT. However, delays beyond this period may result in a taxable event, requiring careful planning and documentation. 

• Investment properties - For investment properties, any capital gains or losses realised upon sale must be included in the estate’s tax return. This underscores the importance of obtaining accurate valuations at the date of death. 

Superannuation Death Benefits 

Superannuation balances do not typically form part of the deceased estate unless directed by a Binding Death Benefit Nomination (BDBN). Instead, they are paid directly to nominated beneficiaries or the estate. 
 
The tax treatment of death benefits depends on several factors, including: 

• The relationship between the deceased and the beneficiary (e.g. spouse, dependent, or non-dependent). 

• The form in which the benefit is paid (lump sum or income stream). 

• The taxable and tax-free components of the superannuation balance. 

The Importance of Estate Planning 

While much of the focus in deceased estate administration is on reactive measures, it highlights the value of proactive estate planning prior to death. Planning ahead of time can include realising assets before death to take advantage of beneficial tax conditions, such as carrying forward capital or income losses that would otherwise go unutilised.  

Need help administering a deceased estate? 

At AR & B Advisors we understand the passing of a loved one can be a stressful and overwhelming time for the person administering a deceased estate. Unlike other financial decisions, it involves a lot of emotions and can be a very complex process. We can help provide the understanding and guidance needed to make the right decisions for you, your loved ones and your family.  

If you would like some advice in administering a complex deceased estate, get in touch with us today to discuss how we can help.