Guide to tax for families

Investing on behalf of children

Children's savings accounts

Savings accounts of dependent children under the age of 16 have special income taxation rules.

If the child's tax file number is not supplied, the investment body must withhold tax at the top marginal tax rate on interest earnings, although tax isn't payable until the child's income, including interest, reaches the under-16 tax-free threshold of $420.

Interest income earned on the account must be declared by whoever controls the account, not whose name it is in, or whose name it is held in trust for.

Children do not need to lodge a tax return if their only source of income is interest totalling less than $416. However, if the investment body has withheld tax, the child must lodge a return to get a refund.

For more information, refer to Children's savings accounts.

Children's share investments

Special rules also apply to children's share investments.

If the child's tax file number is not supplied, the company paying the dividend must withhold tax at the top marginal tax rate on unfranked dividends. However, unlike children's savings interest, there is no threshold before tax is payable, so all unfranked dividends will be taxed at the top marginal tax rate.

Dividends and capital gains or losses on the sale of shares must be declared by whoever rightfully owns and controls the shares, not whose name they are in.

A child who owns shares and who earns more than $416 must lodge a tax return.

	For more information, refer to Children's share investments.
	Families