6.4.5.20 Death of Partner

Summary

This topic explains the reconciliation process when the individual's partner dies.

Executor lodges returns early

If the individual's partner dies during the relevant income year (1.1.R.23) and the executor of the deceased partner's estate lodges the tax returns before the end of the income year, reconciliation does not occur until after the end of the income year when the individual has lodged their tax return.

Example: Mrs Nbebi receives FTB and Mr Nbebi dies on 1 January. The executor lodges the returns in March and the estate is wound up by the end of April. Mrs Nbebi lodges her tax return in August of the first lodgement year and her entitlement is reconciled soon after.

Individual lodges before executor

If an individual whose partner has died lodges his or her return in the lodgement year (1.1.L.30) before the executor has lodged the returns for the deceased partner an interim reconciliation can take place. The executor of the estate is required to lodge the returns before 30 June of the lodgement year so the final reconciliation can occur.

Executor fails to lodge returns

If the executor of the estate has not lodged the tax returns by 30 June of the lodgement year then no further reconciliation takes place and any interim reconciliation outcome becomes the final reconciliation outcome.

Income to be used when partner dies during an income year

Where the partner dies part way through the income year, assessment of the individual's family assistance entitlement is carried out by including:

  • both the individual's and partner/s' (1.1.P.30) ATI for any period they were a member of a couple, and
  • the individual's ATI (1.1.A.20) only for any period after their partner died.

Act reference: FAAct Schedule 3 clause 3 Adjusted taxable income of members of couple

Policy reference: FA Guide 3.2.1 Adjusted Taxable Income - General Provisions

Deceased partner's income to be annualised

Where the partner dies part way through the income year, the actual ATI of the deceased person is annualised for reconciliation purposes to bring it into line with the assessment for all other FTB and CCB individuals.

The formula for annualising is:

Divide Number of days in income year by Number of days partner was alive during income year then multiply by Income of partner to date of death

'Income of partner to date of death' means the ATI of the partner up to and including the day before they died. 'Number of days partner was alive during income year' means the number of days up to and including the day they died.

Example: Mr Nbebi's ATI up to the date of his death on 1 January is $25,000. His annualised ATI for reconciliation purposes is $25,000 × 365 ÷ 184 = $49,592.

Explanation: Only income up to the day before the person died is included. Even if the deceased person has income on or after the date of death (e.g. bank interest, dividends, rental income) it is not included in the deceased person's taxable income. Any income earned on or after the date of death is included in a trust tax return.

Act reference: FAAct Schedule 3 clause 2(2) Adjusted taxable income

Policy reference: FA Guide 6.4.1.30 Reconciliation Process, 6.4.2.10 Verification of Adjusted Taxable Income, 6.4.2.30 FTB Reconciliation Due to Maintenance Income, 6.4.2.50 CCB Reconciliation & Child Care Usage/Attendance Information

Impact of deceased partner's income on reconciliation outcome

The reconciliation outcome for the period before the partner died (i.e. while individual and partner were a member of a couple) can only be a top-up or a nil adjustment. It cannot result in a debt for the period that the individual was with their deceased partner. This is similar to the treatment of individuals who separate during the income year.

Act reference: FAAct Schedule 3 clause 3A Working out adjusted taxable income in certain cases where individuals cease to be members of a couple

Policy reference: FA Guide 6.4.4.20 Reconciliation - Ex-partners

Last reviewed: 20 September 2016