• Children's savings accounts

    If your child is under 18 years, and they earn income on their savings account, you may need to consider the following:

    Income from a savings account is treated differently to income from shares.

    Find out more:

    Who declares interest

    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).

    You need to consider who:

    • provides the money
    • decides how money is spent, regardless of who it is spent on.

    If you provide the money and spend it as you like, you must include the interest in your tax return.

    If the person who owns or uses the funds is the parent, as trustee for the child and

    • no formal trust exists, quote the parent's TFN
    • there is a formal trust, quote the trust's TFN.

    If you hold a joint account, interest earned is divided equally among all account holders, who each declare their share of the income in their tax return.

    If the amount deposited is considered excessive, you will need to examine it carefully to decide where the money came from and whose money it really is.

    Quoting a TFN

    A child can apply for a tax file number (TFN) - there is no minimum age. Children are not exempt from quoting a TFN.

    When deciding whether to quote a TFN, you need to consider your child's age and the amount of interest they receive.

    Your child's age

    If your child is less than 16 years old, special rules apply to their income from a savings account. When we work out their age, we treat them as being under 16 years old until the end of the calendar year in which they turn 16.

    If your child is:

    • any age and they earn less than $120 per year from savings accounts per year, their financial institution will not withhold tax
    • less than 16 years old and earns between $120 and $420 from savings accounts per year and
      • provides either their date of birth or a tax file number (TFN), the financial institution will not withhold tax and they don't need to lodge a tax return
      • doesn't provide either their date of birth or TFN, the financial institution will withhold pay as you go (PAYG) tax at the top tax rate and they need to lodge a tax return if they want a refund
       
    • less than 16 and earns $420 or more from savings accounts per year and
      • provides their TFN, the financial institution will not withhold tax
      • doesn't provide their TFN, the financial institution will withhold PAYG tax at the top tax rate and they need to lodge a tax return if they want a refund
       
    • 16 or 17 years old, earns $120 or more from their savings account per year and
      • provides their TFN, the financial institution will not withhold tax
      • doesn't provide their TFN, the financial institution will withhold PAYG tax at the top tax rate and they need to lodge a tax return if they want a refund.
       

    If you have a joint account between an adult and a child aged under 16 years, the same rules apply as those for a 16 or 17 year old.

    See also:

    Amount of interest earned

    The amount of interest applies to the total interest earned – not just the amount above the threshold ($420 or $120, depending on their circumstances).

    Where a deposit has a term of less than one year, or where interest is paid more than once per year, we apply a daily pro-rata calculation of the threshold ($420 or $120 depending on their circumstances).

    Lodging a tax return

    If your child has had PAYG tax deducted, you will need to lodge a tax return on their behalf if they wish to claim any refund owed.

    If your child does not have a TFN, you will need to get one before you can lodge a tax return on their behalf.

    See also:

    Examples

    Example 1

    Wayne opens an account for his son by depositing $5,000. Wayne is signatory to the account because Jack is four 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.

    End of example

     

    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.

    End of example
      Last modified: 23 Aug 2016QC 16211