- Maximum rate: 1.6% p.a.
- Standard variable rate: 0.05% p.a.
- Monthly fees: $0
Can you gift a kids savings account in Australia?
While you cannot gift a savings account to a child in Australia, there are other ways to gift savings.
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In some countries, such as the United States and Switzerland, you are able to give a gift savings account to a child. While this is not permitted in Australia, there are other ways to gift savings.
Can I gift a savings account to my child or grandchild?
Technically, you cannot gift a savings account to a child in Australia. But a parent, legal guardian or grandparent can open an account in the name of the child. These savings accounts are in the child's name, but managed by the adult until the child reaches an age where they are mature enough to take on the responsibility themselves. Opening a savings account for a child, could be used to help teach children budgeting, saving and managing their money.
The money in the account is earning interest, and in order to be considered a child’s account, it cannot be used for normal child-rearing expenses. Depending on the account balance, the child named on the account may be subject to tax on their interest earnings.
Loretta has decided that this year for Christmas she is going to open a savings account in the name of her grandchild Brian with Suncorp Bank. As his legal guardian, she realises that she is permitted to do so as long as she can provide Suncorp with a copy of his birth certificate. With this account, her grandson can earn bonus interest when a monthly deposit requirement is met, and electronic deposits can be set up from her own bank account or from anyone else.
* This is a fictional, but realistic, example.
What are the tax implications of opening a savings account for a child?
For a savings account held in the name of the child, there is a tax-free threshold of $416 per financial year. Anything above $416 would need to be included on a tax return and will be taxed at the highest current tax rate. Who fills out the tax return with the interest from the savings account depends on who owns and uses the funds.
Example 1. If a parent deposits money into the account and withdraws funds to pay for school expenses, any interest earned must be included on that parent's tax return.
Example 2. If parents or other family members simply deposit money into the account, the interest belongs to the child and will need to be lodged in a tax return on behalf of the child.
What's the youngest age you can open an account for a child?
There is no minimum age limit to open a bank or savings account for a child, but you will need to check with the individual bank for full eligibility criteria. Some banks have different savings accounts for children of different ages.
While there is not a minimum age for a savings account, there are maximum ages. Some accounts are for children under 14, some for under 16 and others for under 18.
Other ways to gift savings to children
- A high interest savings account or a term deposit is an alternative to a standard savings account. Of course, the same rules would apply in terms of tax on interest earnings and parental access.
- If you're looking to avoid tax implications, you could start them off with a simple piggy bank where they put their spare change away for a rainy day purchase.
- An insurance bond can also be established in a child’s name and work like a managed fund to save toward educational or other large expenses. There are also tax advantages to opening this type of gift savings product that make holding onto it for an extended period of time worthwhile.
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