Children's share investments
If your child is under 18 years, and they buy shares, you may need to consider the following:
Income from shares is treated differently to income from interest.
Find out more:
Quoting a tax file number
When you buy shares, you do not have to quote a tax file number (TFN).
If you quote a TFN, you pay taxes on the dividends when you lodge the tax return. If the shareholder is the:
- child, quote the child's TFN
- 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If you do not quote a TFN, pay as you go (PAYG) tax will be withheld at 49% from the unfranked amount of your dividend income.
Whoever rightfully owns and controls the shares declares the dividends and any net capital loss or gain from the sale of shares. You need to consider who:
- provides the money for the shares
- makes share decisions
- spends the dividend income.
If there are large amounts of money or a regular turnover, you might need to examine the ownership of the shares further, including finding more information to work out who should declare the dividends.
Lodging a tax return
If your child owns shares and earns more than $416, you must lodge a tax return on their behalf.
If your child earns $416 or less, you may also want to:
- lodge a tax return on their behalf if too much PAYG tax was withheld
- claim a refund for franking credit by lodging a tax return or completing an Application for refund of franking credit.
Find out about:
Information about who is responsible for paying tax on dividends received from share investments made by or on behalf of children.
Peter withdraws $3,000 from his own bank account to buy shares in the name of his daughter Georgia.
He deposits the dividend of $200 into his own bank account and uses it for his own personal expenses.
Peter declares the $200 on his tax return. When he sells the shares, he will also declare any capital gain or loss.
Simon withdraws $5,000 from his bank account to buy shares in the name of his son Jordan. He quotes Jordan's TFN when he buys the shares.
Simon makes all the decisions about those shares as Jordan is only three years old.
All dividend income and any profit from the sale of those shares are deposited into a bank account in Jordan's name with Simon as trustee.
The dividends and capital gains are declared on Jordan's tax return.
Jenny buys shares on behalf of her daughter, Talia, with money saved from Talia's part-time job, plus money received for Talia's birthday. Talia and Jenny decide not to quote Talia's TFN.
Dividends of $300 are deposited in Talia's bank account.
Talia declares the $300 on her tax return. When those shares are sold, any capital gain or loss from the sale will belong to Talia.
End of example