Childrens savings accounts

PAYG tax and children's accounts

At what age can a child get a TFN?

A child can get a tax file number (TFN) at any age (there is no minimum age).

Children are not exempt from quoting a TFN.

Interest

If a child quotes their date of birth, they are entitled to a threshold of $420 per income year on interest. If they don’t quote their date of birth, the threshold is the same as the adult threshold of $120 per income year.

Where the total interest earned during an income year is $420 or more

if the child quotes a TFN, the investment body will not withhold pay as you go (PAYG) tax, and
if the child does not quote a TFN, the investment body will withhold PAYG tax at 46.5%.

This applies to the total interest earned (not just the amount above $420, or the payment period threshold equivalent).

If the child has had PAYG tax deducted, they will need to lodge a return to claim these amounts back from the Tax Office. A child who does not have a TFN will need to get one before they can lodge a return.

Does a child have to quote a tax file number (TFN)?

Account held by a child in the child’s name only:

If the child…

and investment income is…

then the child…

is aged less than 16 (see note below)

less than $420 per year (see note below)

does not need to quote their TFN, but

needs to provide their date of birth.

$420 or greater per year

needs to quote their TFN, otherwise PAYG tax will be withheld.

is aged more than 16

less than $120 per year

does not need to quote their TFN.

$120 or greater per year

needs to quote their TFN, otherwise PAYG tax will be withheld.

Note:

A child is treated as being under 16 until the end of the calendar year in which they turn 16.
If the account is held by the parent on behalf of the child, but there is no formal trust, the parent quotes their own TFN.
If there is a formal trust, quote the trust TFN.
For joint accounts between an adult and a child, the threshold amount is $120.
Where a deposit has a term of less than one year, or where interest is paid more than once per year, a daily pro-rata calculation of the payment period threshold ($420 or $120) is applied.

Who declares interest earned by the child's savings account?

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, regardless that 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...

then...

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

that person needs to declare the interest from that account in their own tax return.

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...	then...
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	the interest earned is the child’s income.

Caution:

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.

Example 2

Shauna is aged 8. Shauna 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.

D oes the child need to lodge a tax return?

The child does not need to lodge a tax return if their only source of income is interest totalling less than $2,667.

However, if pay as you go (PAYG) tax has been withheld, the child must lodge a return to get a refund.

What to read/do next

For more information about:

income from interest in general, read Interest income
who should declare the interest income from children’s savings accounts, read Taxation Ruling IT 2486: Income tax: children’s savings accounts
the tax status of monetary gifts to children, and the interest earned from such gifts, read Taxation Determination TD 93/148: Income tax: are monetary gifts received by a child or any interest earned on investing such money treated as 'excepted assessable income'?
the special rules that apply to the unearned income of minors, read Income of individuals under the age of 18

For help applying this information to your own situation, phone us on 13 28 61.

Last Modified: Tuesday, 30 June 2009

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