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 August 24th, 2019
$
$
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
BCU Scoot's Super Saver
2.76%
2.76%
$0
$0 / $0
Ongoing, variable 2.76% p.a. with no monthly deposit requirements to meet. Available on balanced up to $49,999.
People's Choice Young Saver Account
2.10%
1.10%
1.00%
$0
$0 / $0
Ongoing, variable 2.10% p.a. when you deposit $5+ each month and make no withdrawals within the calendar month. Available on the entire balance.

Compare up to 4 providers

Rates last updated August 24th, 2019
$
Name Product Debit Card Access ATM Withdrawal Fee Fee Free Deposit p.m. Monthly Account Fee Product Description
NAB Classic Banking
Visa
$0
$0
Easily transfer pocket money via Internet banking or the NAB app to allow children to make purchases and obtain cash withdrawals using their debit card. The debit card can be accessed by a child aged 14 or over once a parent or guardian opens the account and gives them joint authority to operate it.
MyState Bank Glide Account
Visa
$0
$0
This account can be opened for children under 18. Upon turning 10, the child can be nominated as an account signatory with written consent from the account opener. If your child is over the age of 14, they can open this account themselves in their own name and receive access to a Visa Debit card with a daily withdrawal limit at ATMs, EFTPOS and Bank@Post.
Commonwealth Bank Smart Access
Mastercard
$0
$2,000
Get unlimited CBA electronic transactions using internet banking, phone banking, ATM and EFTPOS.

Compare up to 4 providers

Looking for a prepaid card for your kid's pocket money?

Spriggy is a mobile app with a linked prepaid card which helps Australian parents and their kids to manage their money together and track their progress in a fun, interactive app.

  • $30 per year for each child
  • Pre-paid Visa debit card accepted anywhere
  • Cards come in a range of funky, kid-friendly designs
  • Keep tabs on your child's spending, saving and chores via the Parent Wallet

Try the app for free for 30 days. Sign up online in 2 minutes or less by clicking the "Go to site" button.

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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