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

Helping your child grow their savings is like polishing gold—done right, it shines brighter over time. But did you know the Australian Taxation Office (ATO) could have a claim on your child’s bank interest or investment earnings?

Whether your child earns income from a part-time job, collects interest on a savings account, or receives dividends, it’s important to understand how tax works for minors. Here’s what every parent should know.

Why Tax Can Apply to Children’s Money

Under Australian tax law, a “minor” is anyone under 18 years old at the end of the financial year. Special tax rates apply to most of their income unless it falls into specific exceptions.

These tax rates aim to prevent adults from shifting investments to children to reduce tax.

For the 2024–25 year:

$0–$416: No tax
$417–$1,307: Taxed at 66% of the amount over $416
Over $1,307: Taxed at 45% of the entire amount

📊 Note: Minors generally can’t claim the Low Income Tax Offset (LITO) on unearned income, so the effective tax-free limit remains $416.

Source: ATO – Tax rates for individuals under 18

What Is Excepted Income?

Some income types are treated more favourably. Known as “excepted income,” these amounts are taxed at normal adult rates. That means your child may access the full $18,200 tax-free threshold, just like adults.

Excepted income includes:

Wages and other work income
Centrelink pensions and certain benefits
Income from a deceased estate or disability trust
Income from a family trust (under specific conditions)

If your child earns only excepted income, they’re also eligible to claim offsets like LITO.

Source: ATO – Excepted income for minors

Bank Accounts: When Does Interest Trigger Tax?

Children’s savings accounts can earn interest without tax being withheld—but only if their Tax File Number (TFN) or date of birth is provided to the bank.

For account holders under 16 years old, the thresholds are:

Interest under $120/year: No tax withheld
$120–$420/year: No tax withheld if the bank has your child’s TFN or DOB
Over $420/year: If no TFN is provided, tax is withheld at 47%

🚨 Dividends are treated differently. The $420 threshold applies only to bank interest, not to dividends from shares. If your child receives dividend income, even small amounts can trigger the need for a tax return.

Source: ATO – Children’s savings accounts

Should My Child Get a TFN?

Yes. There is no minimum age to apply for a TFN, and it can help your child avoid unnecessary tax withholding. A TFN is required to:

Lodge a tax return
Prevent 47% tax being withheld on interest or dividends
Receive certain government payments

If your child owns investments or earns interest above the threshold, applying for a TFN is a smart financial step.

Apply here: ATO – Apply for a TFN

Who Needs to Lodge the Tax Return?

This depends on who the ATO considers the true beneficial owner of the money.

If you provide the funds, control how they’re used, or spend the income, it’s your income—and must be declared on your return.

If the child is the genuine owner, and:

Their non-excepted income (like bank interest or dividends) is over $416, or
Tax was withheld from their income (e.g. no TFN provided), or
They receive dividends, and total income from those exceeds $416

—then a tax return should be lodged in their name.

You can claim refunds of any overpaid tax or franking credits on their behalf.

Watch Out for Joint Accounts

If a savings account is jointly held with a parent or someone aged 16 or over, the ATO will not apply the special under‑16 interest thresholds. In these cases, the full interest may be taxed differently, and TFN withholding may apply immediately unless managed carefully.

Source: ATO – Children’s bank accounts (Joint holders)

Help Your Child Build Wealth—Without Tax Surprises

Your child’s financial journey is like a gold mine—it’s best managed with care, guidance, and the right tools. Teaching them how tax works is a golden opportunity to build strong money habits early.

At DJ Grigg Financial, we help families across the Latrobe Valley manage tax obligations and set up accounts the right way—from TFN applications to minor tax returns.

Get in touch today and let us help you give your child a golden financial future.