22.214.171.124 Death of partner
This topic explains the reconciliation process when an individual's (1.1.I.90) partner (1.1.P.30) 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
For FTB, 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' ATI (1.1.A.20) (or taxable income for SIFS) for any period they were a member of a couple (1.1.M.50), and
- the individual's ATI only (or taxable income only for SIFS) for any period after their partner died.
Act reference: FAAct Schedule 3 clause 3 Adjusted taxable income of members of a couple-FTB and schoolkids bonus, Schedule 3 clause 3AA Adjusted taxable income of members of a couple-CCS
Policy reference: FA Guide 3.2.1 Adjusted taxable income - general provisions
Deceased partner's ATI 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, CCS and ACCS individuals.
The formula for annualising is:
'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 before 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 (for example, 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.
Note: For the purpose of SIFS, a deceased partner's income is not annualised.
Act reference: FAAct Schedule 3 clause 2(2) Adjusted taxable income
Policy reference: FA Guide 126.96.36.199 Reconciliation process, 188.8.131.52 Verification of adjusted taxable income, 184.108.40.206 FTB reconciliation due to maintenance income
Impact of deceased partner's income on reconciliation outcome
The reconciliation outcome for the period before the partner died (that is, 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 (1.1.D.60) 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.