tax implications of opening a kids’ bank account

What are the tax implications of opening a kids’ bank account?

Learn about the taxation implications when you claim interest from a kids’ bank account.

If your child’s bank account has a balance that is earning interest, you need to know how this income is taxed, or whether you’ll need to pay tax at all. The person who contributes money to the kid’s bank account and uses the money must include any interest earnings on their tax return. Read on to find out more about this topic.

Are there any tax implications?

There are no taxation guidelines for opening a kids’ bank account. A kids’ bank account can be opened in the name of the child (if the account type allows it), you can open an account on your child’s behalf as a trustee or a bank account can be opened in the name of a controlling trust.

You’ll need to pay attention to the Australian Taxation Office (ATO) guidelines if funds in your child’s bank account are generating interest. The ATO has specific rules about taxation of interest earnings from a child’s bank account. You’ll need to look at who is providing the money and who is using the money to work out how this income is taxed.

Search and compare kids bank accounts below

Rates last updated September 21st, 2017
$
$
months
Name Product Maximum Variable Rate p.a. Standard Variable Rate p.a. Bonus Interest p.a. Fees Min Bal / Min Deposit Interest Earned Product Description
Bankwest Kids' Bonus Saver
4.75%
0.01%
4.74%
$0
$0 / $0
Ongoing, variable 4.75% p.a. when linked to a Bankwest Children's Savings Account and you deposit $25-$250 each month. Available for children under the age of 15.
Bankwest Children's Savings Account
2.50%
2.50%
0.00%
$0
$0 / $0
Ongoing, variable 2.50% p.a. when you link to Kids’ Bonus Saver from Bankwest. Available on balances $20,000 and over
BCU Scoot's Super Saver
3.50%
0.75%
2.75%
$0
$0 / $0
Ongoing, variable 3.50% p.a. when you deposit $20+ each month and make no more than $5 in withdrawals within the same month. Available on the entire balance.
Commonwealth Bank Youthsaver Account
2.30%
0.01%
2.29%
$0
$0 / $0
Ongoing, variable 2.30% p.a. when you make at least one deposit with no withdrawals each month. Available on the entire balance.
People's Choice Young Saver Account
2.55%
1.45%
1.10%
$0
$0 / $0
Ongoing, variable 2.55% p.a. when you deposit $5+ each month and make no withdrawals within the calendar month. Available on the entire balance.
Suncorp Kids Savings Account
2.75%
1.50%
1.25%
$0
$0 / $0
Ongoing, variable 2.75% p.a. when you deposit $20+ and make only one withdrawal each month. Available on balances more than $0.01.
Westpac Reward Saver - Under 12
1.50%
0.01%
1.49%
$0
$0 / $0
Ongoing, variable 1.50% p.a. when a deposit of any amount and no withdrawals are made each month. Available on the entire balance.
Bendigo Bank PiggySaver Account
1.25%
1.25%
0.00%
$0
$0 / $1
Ongoing, variable 1.25% p.a. .Available on the entire balance. Designed for kids under 12.
P&N Way Cool Saver
1.75%
1.75%
0.00%
$0
$0 / $0
Ongoing, variable 1.75% p.a. available on balances up to $4,999.

Compare up to 4 providers

Who declares interest income from a child’s bank account?

The ATO states the person who declares interest earnings from a kid’s bank account 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).”

If the child’s bank account is held jointly, then interest earnings are divided among the joint account holders and declared in their tax return.

What is the minimum amount of interest you can earn before it needs to be declared?

A financial institution will withhold tax at the highest rate in the following situations:

  • Your child earns more than $120 a year in interest from funds held in their bank account
  • Your child is younger than 16 and earns more than $120 but less than $420 in interest and they have given their Tax File Number (TFN) and date of birth to the account provider

As part of your yearly tax return, it might be worth considering an overhaul of your situation. Learn more about tax returns, what you can claim and what you need to declare to the ATO.

Does my child need a Tax File Number (TFN)?

A child of any age can apply for a TFN, and they can do this at school. Your child will need a Tax File Number to lodge a tax return and declare any interest earnings above the aforementioned thresholds.

Open a kids’ bank account to give your child the best financial start in life. Make sure you’re aware of the taxation implications of interest income from the bank account, especially if there’s a large balance. Compare kids’ bank accounts on finder.com.au today.

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Jacob Joseph

Jacob is a writer and video journalist with finder.com.au. Credit cards, personal loans and savings accounts are his bread and butter, and he likes nothing more helping people understand the sometimes overly complex world of personal finance.

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