Estate Planning

Wills and Taxes

Tax planning opportunities

From a tax point of view, there may be opportunities where unavoidable delays in distribution of estate assets may result in more than one financial year in which assets may be realised.

The scope of tax planning opportunities depends on the beneficiaries’ situations, their personal situation and requirements.

As a type of trust, an estate is treated as a separate taxation entity. As such, it has the same tax rates (for up to 3 years) as an individual and must lodge tax returns. The Commissioner generally accepts that where accessing, realising (where relevant) and distributing certain assets (or their sale proceeds) is complex and slow, that up to three years after death using the general tax free threshold (currently $18,200), may be submitted by the estate as long as no beneficiaries are what is known as “presently entitled” (discussed later). The first return is likely to cover only a partial year, i.e. from the date of death to the end of the financial year. This is called a “date of death” return and the full tax-free threshold applies for that year, and the Medicare levy is applicable. Subsequent tax returns up to three years are taxed at normal personal tax rates. The Medicare levy is not charged.