Who declares the interest depends on who owns or uses the funds of that account (no matter what type of account it is or the name of the account holder).
The parent owns the money if they provided the money and they spend it as they like, whether or not the parent spends the money upon resources for the child. The parent includes the interest in their income tax return.
When an account is held in trust for the child by the parent and the parent controls the income and expenditure in the account, interest earned in that account is included in the parent's income tax return.
Common situations
Note: In all situations other than those outlined below, who owns the money depends on the facts of each case.
In general, if...
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then...
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a person, other than the account holder (child):
- has provided the funds for the child's account, and
- spends or uses the funds in the account as if they belonged to that person
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that person needs to declare the interest from that account in their own tax return.
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Example 1
Wayne opens an account for his son by depositing $5,000. Wayne is signatory to the account because Jack is two years old.
Wayne makes regular deposits and withdrawals to pay for Jack's pre-school expenses.
Interest earned from that account is considered to be Wayne's.
In general, if...
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then...
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- the funds in the account are made up of money received as birthday or Christmas presents, pocket-money, or savings from part-time earnings such as newspaper rounds, and
- these funds are not used by any person other than the child
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the interest earned is the child's income.
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If the amount deposited to the account is considered excessive, further examination is needed to decide where the money came from and whose money it really is.
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Example 2
Shauna is aged 8 and has a savings account in her name.
Shauna's mother Jill is signatory to the account.
The funds (totalling $90) are birthday and Christmas presents from Shauna's relatives.
Interest earned from the account is considered to be Shauna's.
Joint accounts
Interest earned on an account held in multiple names must be divided equally among all account holders who each return their share of the income in their tax return.
Last Modified: Thursday, 7 March 2013