Tax and Your Child’s Money: What Parents Need to Know

Helping your child navigate their early finances includes understanding when tax is payable, who needs a Tax File Number (TFN), and when to lodge a return.

Does Tax Apply to My Child’s Income?

Yes. Children can be taxed on income such as:

• Bank account interest
• Dividends from shares
• Other investment income

For tax purposes, a “minor” is someone under 18 years of age at 30 June of the relevant income year. Special tax rules apply to minors unless they are classed as an “excepted person” or their income is “excepted income.”

Minor Tax Rates: 2024–2025

If your child’s income is not excepted, the following tax rates apply:

• $0 – $416: No tax
• $417 – $1,307: 66% of the amount over $416
• Over $1,307: 45% of the total income

These high tax rates are designed to discourage income-splitting between parents and children.

What Is “Excepted Income” and Who Is an “Excepted Person”?

Minors are taxed at adult rates (and can claim the $18,200 tax-free threshold) if their income is excepted, or they are an excepted person.

Excepted income includes:

• Employment earnings (e.g. part-time job)
• Certain Centrelink payments (e.g. taxable pensions)

Excepted persons include:

• Full-time working minors
• Minors with certain disabilities

Bank Interest: When Tax Applies

Special rules apply to children under 16, until 31 December of the year they turn 16:

• Interest under $120/year: No tax withheld
• $120–$420/year: No tax withheld if the bank has a TFN or date of birth
• Over $420/year:
  • With TFN: No tax withheld
  • Without TFN: Tax withheld at 47%

For 16–17 year-olds, tax can be withheld on interest if they don’t provide a TFN.

Does My Child Need a Tax File Number (TFN)?

There’s no minimum age for getting a TFN, and it’s often beneficial for children to have one, especially if:

• They earn interest or dividends
• A tax return needs to be lodged
• You want to avoid 47% tax withholding on their income

If the income and money are genuinely your child’s, their TFN should be quoted.
If you’re holding funds as trustee without a formal trust, use your TFN.
If it’s held under a formal trust, use the trust’s TFN.

Whose Tax Return Should Report the Income?

It depends on who owns and controls the income:

Include in your tax return if:

• You provided the funds
• You control how the money is used
• You spend the income

Lodge a tax return for your child if:

• The money genuinely belongs to them
• Tax has been withheld (e.g. because no TFN was provided)
• They own shares and earn over $416 in dividends or other income
• Their non-excepted income exceeds $416

Even if income is below these thresholds, a return can be lodged to claim a refund of tax withheld or franking credits.

Helping Your Child Start Strong

Managing your child’s early financial life is an opportunity to teach them responsibility and planning. Understanding how tax applies is part of that process—helping you avoid surprises and make sure their affairs are set up properly from the beginning.