Buying shares for your children: minor accounts and who pays the tax
This covers shares a parent holds for a child under 18 through a broker's minor or trust account, held informally with no written trust deed. It explains who the ATO treats as the owner, how a child's investment income is taxed, and what to lodge at year end. A formal family or testamentary trust is a different arrangement with its own rules, and is not covered here.
Opening a share account in a child's name is one of the most common ways Australian families start investing for their children. The question that follows every June is always the same: does the income go in the parent's tax return or the child's? The answer is not a choice. It depends on whose money it really is, and getting it wrong can mean tax at up to 66% on the child's side or an unexpected capital gain on the parent's side when the child turns 18.
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* General information only. Kristy Pan & Co. provides this material for general knowledge; it does not constitute tax or financial advice and does not take account of your specific circumstances. This information is current as at 26 September 2026; we will do our best to update it when any policy or legislation changes. Please contact us before acting.
What a minor account is
A person under 18 generally cannot hold shares in their own name, because they cannot enter the broker's terms or the CHESS sponsorship agreement. A minor account is the workaround: the parent opens and operates the account, and the child is named as the person the shares are held for.
How it is registered
The holding is in the parent's name, with the child shown as a designation, for example “Nancy Lee <Jessie Lee A/C>”. Brokers call it a minor account, a trust account or a children's account.
What it is legally
An informal trust: the parent is the legal owner and trustee, and the child is the intended beneficiary. There is no trust deed, and no separate trust tax return is normally lodged.
What it does not do
The designation records an intention. It does not, by itself, decide who is taxed on the income. That turns on the facts behind the account, covered in section 3.
Why parents set one up
Start early
It is the only practical way to hold listed shares for a child before 18, so years of growth and reinvested dividends are not lost waiting.
Keep it separate
A child's shares sit apart from the parent's own portfolio, which makes it clear what is earmarked for the child and keeps the records clean.
A clean handover at 18
Where the shares genuinely belong to the child, moving them into the child's own name at 18 is not a capital gains tax event. Section 5 explains why that depends on getting section 3 right.
Many families also use the account to teach children about saving and investing, and it is a natural place to put money given by grandparents for birthdays, Lunar New Year red packets and other occasions.
The question that decides the tax: whose money is it?
The ATO does not go by the name on the account. It looks at who is the beneficial owner of the shares, and it weighs three things.
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Who provided the money
The parent's own savings, or money that genuinely belonged to the child, such as gifts from grandparents or the child's own earnings.
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Who makes the decisions
Who chooses what is bought and sold. A parent deciding on the child's behalf is normal; a parent treating the account as part of their own portfolio is not.
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Who uses the income
Are dividends reinvested or saved only for the child, or do they flow into the family account and get spent on household costs?
The child's income
Scenario A
The money was the child's, it is kept strictly for the child, and the parent operates the account only as trustee. The income is the child's and is taxed at the minor rates in section 4. No CGT event arises when the shares move into the child's name at 18.
The parent's income
Scenario B
The parent provided the money and controls the account. The dividends, franking credits and any capital gains go in the parent's tax return. Transferring the shares to the child later is a disposal by the parent.
You cannot pick whichever return gives the lower tax this year. The treatment follows the facts, and it has to be the same every year.
It is tempting to put the dividends wherever the tax is lowest, or wherever is easiest because the child has no TFN. The ATO looks back at earlier years when the shares are sold or transferred at 18, and a history of switching between the parent's return and the child's is the clearest sign that nobody was really sure whose shares they were. Decide it once, on the facts, record why, and apply it consistently.
Mixed money is common. If the account holds both the parent's savings and the child's gift money, the income can be split in proportion to what each contributed, provided the contributions can be traced. The cleaner fix for the future is to keep the child's own money in a separate account.
If it is the child's income: the minor tax rates
Children under 18 are taxed at special rates on unearned income such as dividends, interest and capital gains. The rules, in Division 6AA, exist to stop adults shifting investment income to their children, so the rates rise steeply above a small threshold.
| Child's unearned income for the year | Tax on that income |
|---|---|
| $0 – $416 | Nil |
| $417 – $1,307 | 66% of the amount over $416 |
| Over $1,307 | 45% of the whole amount |
Franking credits still count
The figures above include franking credits, and those credits are then offset against the tax. Where the tax is nil, excess franking credits are refunded to the child.
No low income offset
The low income tax offset cannot be used against a minor's unearned income, which is why the usual tax-free threshold does not apply here.
Earned income is different
A teenager's wages from a part-time job are excepted income and are taxed at ordinary rates. Some children, such as those working full time, are outside these rules entirely.
An example: same dividends, different outcomes
Nancy holds shares for her daughter Jessie, aged 9, in a minor account. This year the shares paid $840 of fully franked dividends carrying $360 of franking credits, so the income for tax purposes is $1,200. Nancy's own taxable income is in the 30% bracket. The figures are illustrative.
| Whose income, on the facts | Tax before credits | Less franking credits | Result |
|---|---|---|---|
| Nancy's (30% + 2% Medicare levy) | $384 | $360 | $24 payable |
| Jessie's (minor rates: 66% of $784) | $517 | $360 | $157 payable |
| Jessie's, if the income were only $400 including credits of $120 | Nil | $120 | $120 refunded |
The table shows why the facts matter, not which answer to pick. If the money is Nancy's, the income is Nancy's even though the lower tax happens to fall that way too. If the money is Jessie's, it is Jessie's, and above $416 the minor rates bite hard.
Selling shares, and what happens at 18
Capital gains follow the same ownership answer as the dividends. The difference between the two scenarios shows up most clearly on the day the shares move into the child's own name.
Scenario A: the child's shares
No CGT on transfer
Beneficial ownership does not change when the shares are re-registered in the child's name at 18, so there is no disposal. The child keeps the original cost base. Any gains on shares sold before 18 are the child's unearned income, taxed at the minor rates.
Scenario B: the parent's shares
A disposal by the parent
Transferring the shares to the child is a gift, treated as a sale by the parent at market value on the transfer date. The parent pays CGT on any gain, with the 50% discount if held for more than 12 months. The child's cost base starts at that market value.
The Budget announced that for most assets the 50% discount gives way to indexation with a minimum tax, for gains accruing from 1 July 2027.
If a parent in Scenario B expects to transfer shares to a child after that date, the tax on the transfer may be worked out differently from today. The measure was announced, not yet legislated in full, so check the position before acting. Our Federal Budget 2026-27 factsheet sets out what was announced.
TFNs and tax withheld from dividends
Which tax file number is quoted on the account matters in practice, because the ATO's pre-filled data follows the TFN. It should match the ownership answer from section 3.
- Quote the right TFN. If the shares are the child's, quote the child's TFN with the broker and share registries. If they are the parent's, the parent's TFN belongs there. A mismatch means the income appears in the wrong person's pre-fill.
- Watch for withholding. If no TFN is quoted, the share registry may withhold tax at the top rate from the unfranked part of dividends. For a child under 16 a lower threshold generally applies, below which no withholding is required.
- Withheld tax is not lost. Any amount withheld is credited in the return of whoever is taxed on the income. Check the dividend statements for it at year end.
What to do at the end of the financial year
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Settle whose shares they are, and write it down
Work through the three questions in section 3. Keep a short note of where the money came from, with the bank transfers that show it. This is the record the ATO will ask for.
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If they are the parent's: the parent's return
Include the dividends, franking credits and any capital gains in the parent's tax return. Nothing is lodged for the child. This is the usual position where a parent funds the account from their own savings.
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If they are the child's and the income is $416 or less
No tax is payable and a tax return is generally not required. If the dividends carry franking credits, lodge a refund of franking credits application to get them back.
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If they are the child's and the income is over $416
A tax return is needed so the minor rates can be applied and the franking credits offset. In most cases this is a return in the child's name. Where the account is run as a formal trust, the trustee may need to lodge instead.
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Keep it consistent
Use the same treatment every year and keep the broker statements, dividend statements and records of every purchase and sale until at least five years after the shares are finally sold.
How we help
We work out whose shares they are from the actual money trail, including accounts that mix a parent's savings with a child's gift money, and then prepare the right return: the parent's, the child's, or a franking-credit refund. We also look ahead to the transfer at 18, so the family knows whether it will be tax-free or a capital gain before it happens. Talk to us before you lodge.
Common questions
Do I put my child's share dividends in my tax return or theirs?
It depends on whose money bought the shares and who controls them, not on whose name is on the account. If you provided the money and make the decisions, the dividends go in your return. If the money genuinely belonged to your child and is kept only for them, the income is your child's.
Does my child need to lodge a tax return for dividends?
Only if the income is your child's and their total unearned income is more than $416 for the year. At $416 or less no tax is payable and a return is generally not required, although lodging a refund of franking credits application can get the franking credits back.
How much tax does a child pay on dividends?
For a child under 18, unearned income such as dividends is tax-free up to $416. Between $417 and $1,307 the tax is 66% of the amount over $416, and above $1,307 the whole amount is taxed at 45%. Franking credits are included in the income and then offset against the tax.
Can I choose which tax return to put the income in?
No. Whose income it is depends on the facts: who provided the money, who makes the decisions and who uses the income. The treatment should be decided once, recorded, and applied the same way every year.
Is there capital gains tax when the shares move into my child's name at 18?
Not if the shares were genuinely your child's all along, because beneficial ownership does not change. If they were yours, transferring them is treated as a sale by you at market value, and you may have a capital gain to report.
Glossary of terms
- Minor account
- A broker account opened and operated by a parent, with the holding registered in the parent's name and designated for a child under 18. Also called a trust account or children's account.
- Informal trust
- A trust that arises from how an asset is held and used rather than from a written deed. The legal owner holds the asset for the benefit of someone else.
- Beneficial owner
- The person who is really entitled to an asset and its income, as distinct from the person whose name is on the register. For tax, the beneficial owner is generally the one taxed.
- Unearned income
- Income from investments rather than work, such as dividends, interest, rent and capital gains.
- Division 6AA
- The part of the tax law that applies special tax rates to the unearned income of people under 18, to discourage income splitting with children.
- Excepted income
- Income of a minor that is taxed at ordinary rates rather than the minor rates, including wages from a job and certain income from deceased estates.
- Franking credit
- The company tax already paid on a franked dividend. It is added to the dividend as income and then offset against the tax, with any excess refunded to Australian residents.
- Refund of franking credits
- A short ATO application that lets someone who does not need to lodge a tax return claim back the franking credits on their dividends.
- Cost base
- What an asset cost for capital gains tax purposes. The gain on sale is the proceeds less the cost base.
- TFN
- Tax file number. Quoting it to a broker or share registry avoids tax being withheld from dividends and links the income to the right person's pre-filled tax data.
- ATO
- The Australian Taxation Office, which administers income tax and capital gains tax.
This factsheet contains general information only. Whether shares held for a child belong to the parent or the child for tax purposes is a question of fact that depends on the full circumstances. The example is a simplified illustration and the rates and thresholds are those in effect as at September 2026; they can change. It does not take into account your circumstances and is not personal tax or financial product advice. Please consult Kristy Pan & Co. before acting.