Tax and SARS knowledge base
How is a deceased person's final tax year split when they die?
How is a deceased person's final tax year split when they die?
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Direct answer
The final tax year is not simply all cash received before the estate is wound up. SARS says that, after an individual dies, a pre-date-of-death assessment covers the deceased person's income and deductions up to the date of death, while a post-date-of-death assessment concerns income received or accrued by the deceased estate. The executor needs to sort records around that date and identify which taxpayer earned or incurred each amount.
The important distinction is legal timing, not who holds the bank account when money arrives. A careful schedule makes the return work clearer and gives the executor evidence for a SARS query.
What this means in practice
Take the date of death and make it the first column in the estate tax workbook. For each amount, record the source, what it relates to, relevant service or accrual period, payment date, certificate reference and supporting document. A salary payment made after death can relate partly or wholly to services before death. A bank-interest credit can be estate income if it is generated after the date of death. Rental receipts require the lease, property statement and period information to determine the correct classification.
SARS describes the pre-death return as covering income and deductions applicable to the taxpayer up to death. The estate return guide addresses income received or accrued by the estate. Do not combine both sides merely because the same executor is responsible. That can distort the assessment and make it difficult to reconcile later distributions, estate accounts and third-party certificates.
Start early. Employers, banks, investment managers, administrators, tenants and accountants may have records that cover the death date. Ask them for detail, rather than only an annual total. When an item cannot be classified, preserve the uncertainty and obtain advice before it is reported.
Step-by-step
- Record the exact date of death.
Use the death certificate and retain it with the tax file. Tell every record provider the cut-off date.
- Create two schedules.
Label one "individual up to death" and the other "estate after death". Include an unclassified tab for items awaiting evidence.
- Gather date-specific documents.
Request payslips, IRP5 and IT3 certificates, rental ledgers, bank statements, business accounts, retirement correspondence and invoices.
- Test accrual and service periods.
Ask what the amount relates to, not only when it cleared the bank. Save the confirmation with the schedule.
- Map deductions separately.
Expenses and deductions also need a date and taxpayer analysis. Do not carry an estate cost back to the deceased person without a basis.
- Use the current SARS guides.
Apply the individual ITR12 guidance for the pre-death information and the deceased-estate guide for post-death estate income.
Documents and records to keep
- Death certificate and executor appointment documents.
- A date-of-death income and deduction schedule.
- Statements with opening and closing balances around the death date.
- Provider confirmations explaining salary, rent, interest, dividends or business amounts.
- SARS returns, assessments and correspondence.
Important limits and exceptions
The exact number and timing of assessments depends on the estate facts, income type and SARS process. A beneficiary payment does not itself tell you whether an amount was estate capital or income. Retirement benefits, foreign assets, trusts, businesses, jointly owned property and a property sale can introduce additional rules.
This article does not determine accounting accruals, estate duty, CGT or beneficiary taxation. It explains why the cut-off must be documented, not how to complete every field in a specific estate.
An executor should also reconcile both schedules to the estate cashbook and liquidation-and-distribution records as administration proceeds. That does not replace the tax classification exercise, but it helps identify an amount omitted from either schedule and explains why a later receipt was treated as an estate item. Preserve the reconciliation date and preparer.
When to get tailored advice
Get advice if the estate has substantial investment income, rental property, a sole proprietorship, a trust, foreign holdings, a sale near the death date or incomplete records. TaxProof can assemble the evidence schedule so the executor and adviser can review it efficiently.