The ATO and tax after death
Updated 20 August 2026 · 7 minute read
Start with the good news, in the ATO's own words: there are no inheritance or estate taxes in Australia. What exists instead is unfinished business — the deceased's last return, possibly a few estate returns, and capital gains rules that reward executors who watch the calendar.
The sequence
Notify the ATO of the death
Online form plus an Australia Post identity interview, or by paper with certified documents. Allow about 28 days to process. A relative, the executor or a tax agent can notify; the executor needs the grant to be recorded as the authorised representative.
Lodge the 'date of death' return
The deceased's final individual return, covering 1 July to the date of death — due on normal timeframes. If income was under the threshold, a 'return not necessary' advice does the job.
Estate trust returns, if needed
Income the estate earns AFTER death (interest, rent, dividends) belongs to the estate as a trust. For the first three income years, returns are needed if estate income exceeds the tax-free threshold — the estate benefits from adult marginal rates in that window. The estate needs its own trust TFN.
Clearance before distribution
Prudent executors confirm all returns are lodged and assessed before final distribution — tax debts follow the executor personally if assets were given away first.
CGT: where the real money moves
- Death itself triggers no CGT — assets pass to the estate and beneficiaries with rollover
- The two-year home rule: the deceased's main residence sold with settlement within 2 years of death is fully CGT-exempt — regardless of what the property did in between. The Commissioner can extend for genuine delays (probate disputes, market collapse)
- Inherited investment assets carry the deceased's cost base (post-1985 assets) — get date-of-death valuations now, they anchor every future CGT calculation
- Beneficiaries pay CGT only when THEY later sell — inheriting is not a taxable event
A family that dawdles past two years on the home sale can hand the ATO tens of thousands unnecessarily. If probate delays threaten the window, document everything — extensions are granted for causes outside your control, not for indecision.
Estate with property or investments?
Fixed-fee firms coordinate the grant, the sale window and the accountant — three clocks, one plan.
Get fixed-fee probate quotesDoes super get taxed at death?
Separately from all this — death benefits to non-dependant adult children commonly lose 15% plus Medicare on the taxed element. The super guide covers it.
Is the $416 minor threshold relevant?
Distributions of estate income to child beneficiaries have special (favourable) excepted-income treatment compared with ordinary minors' unearned income — worth an accountant's hour in estates with young beneficiaries.
The deceased hadn't lodged for years — how far back?
The ATO expects outstanding prior-year returns lodged too. A tax agent can often negotiate sensibly where records are thin.
Sources
- ATO — notifying us of a death; deceased estate returns; inherited property and CGT (two-year rule)
- ATO — 'There are no inheritance or estate taxes in Australia'