When someone passes away, their tax obligations do not automatically disappear. Along with organising financial records, managing assets and supporting family members, the executor may need to deal with tax returns that were never lodged during the person’s lifetime.
Finding years of missing paperwork can feel overwhelming, particularly when you are unsure what the Australian Taxation Office (ATO) expects. The good news is that outstanding returns can still be addressed. The important thing is to identify what is missing, gather the available information and take the right steps before the estate is finalised.
Can a Deceased Person Have Outstanding Tax Returns?
Yes. A person may pass away without lodging one or more required income tax returns. This can happen because of illness, financial difficulties, a lack of awareness about lodgement requirements or simply because paperwork was overlooked.
After their death, the executor or authorised legal personal representative may need to review the person’s tax history and arrange any outstanding lodgements.
The ATO can provide information about previous tax returns when the death is reported and the appropriate person is authorised to manage the deceased person’s tax affairs. This helps establish which years need attention.
Who Is Responsible for Lodging Outstanding Tax Returns?
In most cases, the executor named in the will or an administrator appointed to manage the estate handles the deceased person’s tax affairs. This person acts as the legal personal representative and may appoint a registered tax agent to assist.
The responsibilities can include:
- Checking the deceased person’s previous tax lodgements.
- Identifying overdue returns and outstanding tax liabilities.
- Gathering income statements, bank records and other supporting documents.
- Arranging the final individual tax return, where required.
- Addressing tax obligations connected with the estate after death.
Family members and beneficiaries do not automatically become responsible for lodging every outstanding return simply because they are related to the deceased. The executor or authorised representative should establish the correct process based on the estate’s circumstances.
What Happens If Previous Tax Returns Were Never Lodged?
The next steps depend on the number of missing returns, the income earned and whether tax is payable.
1. The ATO may require outstanding returns
If previous returns were required but never lodged, the executor may need to arrange them for the relevant income years. The ATO may also request supporting information to establish the person’s tax position.
Ignoring the issue can make estate administration more difficult, particularly when financial records are incomplete or assets are ready to be distributed.
2. The deceased person may have unpaid tax
Once the missing information is reviewed, there may be tax payable for one or more years. Alternatively, a return may show that the person was entitled to a refund.
The amount cannot be determined simply by counting the overdue years. Each return needs to be assessed using the income, deductions and tax rules applicable to that period.
3. Penalties or interest may need to be considered
Late lodgement and unpaid tax can have consequences under tax law. Depending on the circumstances, penalties or interest may apply. The executor should check the ATO’s position rather than assume that a person’s death removes any existing tax liability.
If the estate cannot pay an amount immediately, it is sensible to obtain advice about the available options before taking further action.
Does the Executor Need to Lodge a Final Tax Return?
A date-of-death tax return may be required for the income year in which the person died. It generally covers the period from 1 July of that financial year up to the date of death.
The ATO identifies circumstances that can make this return necessary, including when the person had taxable income above the relevant threshold, tax withheld from income, previous lodged returns or outstanding returns.
This final individual return is different from a deceased estate trust tax return. The latter relates to income earned by the estate after the person’s death, such as rental income or dividends, when lodgement is required.
Understanding the difference helps prevent missed obligations and confusion about which income belongs in each return.
What Documents Are Needed to Lodge Overdue Returns?
Locating records is often one of the most time-consuming parts of the process. Executors should collect as much reliable information as possible for each outstanding financial year.
Useful documents may include:
- Previous tax returns and notices of assessment.
- Income statements, payment summaries and pension records.
- Bank interest and dividend statements.
- Rental property income and expense records.
- Investment sale documents and capital gains information.
- Receipts or records supporting work-related or other allowable deductions.
- Business income, expense records and relevant activity statements, where applicable.
If some documents are missing, do not assume the return cannot be completed. Contact the relevant banks, employers, financial institutions or the ATO to find out what information can be recovered.
Can the Estate Be Finalised Before All Tax Returns Are Lodged?
Executors should take care before distributing estate assets. Outstanding tax matters can affect the amount available to beneficiaries, and the estate may have liabilities that need to be settled or provided for.
Before making a final distribution, review the deceased person’s outstanding tax position and any tax returns required for the estate itself. The appropriate timing depends on the circumstances, so professional advice can help reduce the risk of overlooking an obligation.
How Can an Accountant Help With Unlodged Tax Returns?
Managing several overdue returns while administering an estate can be difficult, especially when records span multiple years or involve rental properties, investments or business income.
A tax professional can review the available records, identify missing lodgements, help prepare the relevant returns and explain any tax payable or refund due. They can also help distinguish the deceased person’s individual tax obligations from those of the estate.
If you are an executor dealing with complex records or uncertainty about previous lodgements, consulting a Deceased Estate Accountant can help you understand the steps involved and organise the necessary paperwork.
For families and executors in Western Australia, an accountant in perth may also assist with coordinating tax records and preparing the required documentation.
Final Thoughts
Discovering unlodged tax returns after someone has died can add another layer of stress to an already difficult time. However, the issue can usually be approached methodically by checking the person’s tax history, collecting financial records and identifying which returns remain outstanding.
The key is not to leave the matter until the estate is ready to close. Addressing missing lodgements early gives the executor a clearer picture of the estate’s financial position and helps them make informed decisions about its administration.
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