A deceased estate tax return usually means two separate lodgements: a final individual tax return for the person who died, covering 1 July to the date of death, and trust tax returns for the estate for income earned after the death. The executor or administrator is responsible for both.
The final return can’t be lodged through myTax or myGov. It is done on a paper return or by a registered tax agent, and the estate needs its own tax file number if it has to lodge trust returns.
This guide walks executors through notifying the ATO, the date of death return, when the estate must lodge, how estate income is taxed in 2026-27, a worked example and the rules for selling an inherited home.
Key takeaways
- The date of death return covers 1 July of the year of death up to the date of death. It is lodged on paper or through a registered tax agent.
- If no final return is needed, send a non-lodgment advice with ‘DECEASED’ and the date of death in the reason field.
- The estate’s first income year runs from the day after death to the next 30 June.
- In the first 3 income years, the estate must lodge if net income is above the tax-free threshold, a beneficiary is presently entitled, or a beneficiary isn’t an Australian resident. From year 4, it must lodge if it earns any income.
- Finalise all tax before distributing assets. The ATO says an executor may have to pay outstanding tax personally if they distribute first.
Deceased estate tax return at a glance
| Item | Rule |
|---|---|
| Final (date of death) return | 1 July of the year of death to the date of death |
| How to lodge the final return | Paper tax return for individuals, or a registered tax agent. Not myTax or myGov |
| No final return needed | Non-lodgment advice with ‘DECEASED’ and the date of death |
| Estate’s first income year | Day after death to the next 30 June |
| Trust return needed in years 1 to 3 | Net income above the tax-free threshold, a beneficiary presently entitled, or a non-resident beneficiary |
| Trust return needed from year 4 | Any income, including capital gains |
| Tax on income no beneficiary is entitled to (years 1 to 3) | Individual tax rates with the full $18,200 tax-free threshold, no Medicare levy and no tax offsets |
| ATO record update after notification | Up to 28 days |
| Inherited home | May be fully exempt from CGT if the sale settles within 2 years of death and conditions are met |
What is a deceased estate tax return?
“Deceased estate tax return” is a common name for two different returns, and keeping them apart is the first job:
- The date of death return is the deceased person’s final individual return. It includes their income, deductions and any capital gains or losses from CGT events before death.
- The estate’s trust tax return covers income the estate earns after death, such as rent, interest and dividends, and gains on assets the estate sells.
The ATO’s guide to the final tax return for the deceased person also says you may need to lodge returns for earlier years if the person had outstanding returns. If any are missing, our guide to late tax returns explains the process.
How do you notify the ATO of a death?
Before you can deal with the deceased person’s tax affairs, the ATO needs to record the death and who will manage the estate. Under the ATO’s notification guidance, only the executor (with a grant of probate) or administrator (with letters of administration) can nominate to manage the estate. You can notify the ATO by:
- Online form and interview: complete the online form, then attend an interview at a participating Australia Post outlet with original or certified documents.
- Paper form by mail: send the paper form with certified copies, which the ATO won’t return.
You need a death certificate or a grant of probate or letters of administration. A will alone doesn’t let the ATO record you as the authorised representative, which limits what it can release to you. Records can take up to 28 days to update.
How do you lodge the date of death return?
The date of death return covers the period from 1 July of the income year the person died up to the date of death. The ATO says you can’t use myTax or myGov. You either use the paper tax return for individuals or have a registered tax agent lodge it online. On a paper return:
- write ‘DECEASED ESTATE’ at the top of the first page
- use a name such as ‘LEGAL REPRESENTATIVE OF [name] (DECEASED)’
- answer ‘No’ to the question about lodging a future tax return
- sign on behalf of the deceased person
If no return is needed, lodge a non-lodgment advice and write ‘DECEASED’ followed by the date of death in the reason field.
Capital gains and losses from CGT events before death go in this return. CGT can also apply at death if an asset passes under the will to a foreign resident, a charity or a super fund, and that gain or loss is reported in the date of death return too. Our individual tax return team can prepare the final return and any overdue years.
When does the estate need to lodge a trust tax return?
For a deceased estate tax return, the estate is a separate taxpayer from the day after death. Its first income year starts the day after the person died and ends on the next 30 June. According to the ATO’s guide on when to lodge returns for a deceased estate:
- Income years 1 to 3: lodge a trust tax return if the estate’s net income is above the tax-free threshold, a beneficiary is presently entitled to income at year end, or a beneficiary isn’t an Australian resident for tax purposes.
- Income year 4 onwards: lodge if the estate earns any income, including capital gains.
You need a trust TFN for the estate if it has to lodge. If the estate runs a business, it also needs its own ABN and can’t keep using the deceased person’s. Our trust accounting team can register the estate and prepare its returns.
How is deceased estate income taxed?
Who pays depends on whether a beneficiary is presently entitled to the income. The ATO’s page on who pays tax on deceased estate income says:
- Beneficiary presently entitled: the beneficiary usually reports their share in their own tax return. The trustee pays instead if the beneficiary is a foreign resident for tax purposes or under a legal disability, such as being under 18.
- No beneficiary presently entitled: the trustee (executor) pays the tax, for example while the estate is still being administered.
For income no beneficiary is entitled to, the ATO’s deceased estate tax rates page says the estate can use individual tax rates with the full tax-free threshold for its first 3 income years. No Medicare levy is payable and the estate gets no tax offsets. This concession can’t be extended. After that, higher trust rates apply. For 2026-27, the resident individual rates are nil up to $18,200, then 15% to $45,000, 30% to $135,000, 37% to $190,000 and 45% above that.
Watch out: don’t distribute too early
The ATO’s checklist for when someone dies says to finalise tax obligations before distributing the estate’s assets. The executor is liable for the deceased person’s outstanding tax and may have to pay it personally if they distribute the assets first.
Worked example: estate tax in 2025-26 and 2026-27
The lowest tax rate for individuals fell from 16% to 15% on 1 July 2026. Because estates in their first 3 income years use individual rates, the cut flows through to estate income no beneficiary is entitled to.
The facts
- Margaret dies on 30 September 2025. Her executor, Sam, notifies the ATO and gets a TFN for the estate.
- Margaret’s rental property stays in the estate while probate is sorted out. It earns net rental income of $40,000 in each of the estate’s first two income years.
- No beneficiary is presently entitled to the income, so Sam pays the tax as trustee.
- The estate’s first income year is 1 October 2025 to 30 June 2026 (2025-26). Its second is 2026-27.
Year 1: 2025-26 rates
- Taxable income: $40,000
- Tax-free threshold: $18,200
- Taxed at 16%: $40,000 − $18,200 = $21,800
- Tax: $21,800 × 16% = $3,488
- No Medicare levy and no tax offsets
Year 2: 2026-27 rates
- Taxable income: $40,000
- Taxed at 15%: $21,800
- Tax: $21,800 × 15% = $3,270
- Saving compared with year 1: $3,488 − $3,270 = $218
Margaret’s own salary and rent from 1 July to 30 September 2025 go in her date of death return, not the estate’s return. Sam must lodge the estate’s trust return in both years because its net income is above the tax-free threshold. From the estate’s fourth income year, different trust rates would apply.
What happens if the estate sells an inherited home?
The ATO’s guide to inherited property and CGT says an inherited dwelling can be fully exempt from capital gains tax if it is sold under a contract that settles within 2 years of the death, and either:
- the deceased acquired it before 20 September 1985, or
- it was the deceased’s main residence just before they died and wasn’t being used to produce income (for property inherited after 20 August 1996).
It doesn’t matter whether the home was rented out or lived in during those 2 years. The period can be extended if the sale is delayed by exceptional circumstances outside your control. Different rules apply if the deceased had been a foreign resident for more than 6 years at the time of death.
If the exemption doesn’t fully apply, the cost base of inherited assets matters. For a home that was the deceased’s main residence and not income-producing just before death, the cost base is its market value at the date of death. For other assets acquired after 20 September 1985, the deceased’s cost base generally carries over. Our guide to inherited property capital gains tax works through examples, and our capital gains tax team can do the calculation.
What deceased estate tax return mistakes do executors make?
- Combining the two returns. Income before death and income after death belong in different returns.
- Using the deceased person’s TFN for estate income. The estate needs its own TFN if it has to lodge.
- Missing the year 4 change. From the fourth income year, the estate must lodge if it earns any income at all.
- Distributing before tax is finalised. The executor can become personally liable.
- Assuming any inherited home is exempt. The 2-year rule only works if the conditions are met.
- Forgetting super. Super paid to the estate has its own tax rules, covered in our guide to superannuation death benefit tax.
Tip: build a simple executor checklist
- Death certificate, will and grant of probate or letters of administration
- Deceased person’s TFN, income statements and prior returns
- Bank, share and rental statements split at the date of death
- Purchase contracts and cost base records for every asset
- Beneficiary details, including whether any are non-residents or under 18
If the estate is held in a testamentary trust, our guide to trust deeds in Australia explains how the deed sets the trustee’s powers. Once the final return is assessed, our guide to the notice of assessment helps you check the result.
Frequently asked questions
Can I lodge a deceased person’s tax return on myTax?
No. The ATO says you can’t use myTax or myGov for a date of death return. Use the paper tax return for individuals or have a registered tax agent lodge it.
What period does the date of death return cover?
It covers 1 July of the income year in which the person died up to the date of death. Income earned after death belongs to the estate.
Does a deceased estate have to lodge a tax return every year?
In the first 3 income years, only if net income is above the tax-free threshold, a beneficiary is presently entitled, or a beneficiary is a non-resident. From the fourth income year, the estate must lodge if it earns any income, including capital gains.
What tax rate does a deceased estate pay?
For income no beneficiary is entitled to, the estate uses individual tax rates with the full $18,200 tax-free threshold for its first 3 income years, with no Medicare levy and no tax offsets. For 2026-27, that means nil up to $18,200 and 15% from $18,201 to $45,000. Different trust rates apply from the fourth income year.
Is an inherited house taxed if the estate sells it?
It can be fully exempt from capital gains tax if the sale settles within 2 years of the death and the home was the deceased’s main residence just before death and not used to produce income, or they acquired it before 20 September 1985. Otherwise CGT may apply.
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Talk to a registered tax agent
Acting as an executor and not sure where to start? Call Nanak Accountants & Associates on 1300 626 258. Our individual tax return accountants can lodge the date of death return and any overdue years, and our trust accounting team can register the estate and handle its trust returns. You can also contact our team to book a time.
This article is general information only and is not personal financial or tax advice. Information checked against ATO sources on 19 October 2026.
