Estate planning often focuses on the paperwork in terms of a Will or Power Of Attorney. There are other administrative tasks that you may consider attending to at the same time, such as applying for a tax file number (TFN) for the kids. In situations where assets may be transferred to children from an estate, it may be beneficial for them to have a tax file number.
There is no minimum age restrictions for getting a TFN. In fact, children are not actually exempt from quoting a TFN to banks or other investment accounts.
When deciding whether to quote a TFN, you need to consider your child’s age and the amount of interest they receive.
Your child’s age matters
If your child is less than 16 years old, special rules apply to their income from a savings account. The tax office treats them as being under 16 years old until the end of the calendar year in which they turn 16 for simplicity.
If your child is:
- any age and they earn less than $120 per year from savings accounts per year, their financial institution will not withhold tax
- less than 16 years old and earns between $120 and $420 from savings accounts per year and
- provides either their date of birth or a tax file number (TFN), the financial institution will not withhold tax and they don’t need to lodge a tax return
- doesn’t provide either their date of birth or TFN, the financial institution will withhold pay as you go (PAYG) tax at 47% and they need to lodge a tax return if they want a refund
- less than 16 and earns $420 or more from savings accounts per year and
- provides their TFN, the financial institution will not withhold tax
- doesn’t provide their TFN, the financial institution will withhold PAYG tax at 47% and they need to lodge a tax return if they want a refund
- 16 or 17 years old, earns $120 or more from their savings account per year and
- provides their TFN, the financial institution will not withhold tax
- doesn’t provide their TFN, the financial institution will withhold PAYG tax at 47% and they need to lodge a tax return if they want a refund.
If you have a joint account between an adult and a child aged under 16 years, the same rules apply as those for a 16 or 17 year old.
For more information, speak to Paris Financial Tax Champion today on (03) 8393 1000.
