Looking for a child trust fund in Australia? There isn't a government scheme, so most families invest through an account an adult holds on the child's behalf. Get the structure wrong and the tax can be steep, so here's how it works.
Key takeaways
- Income in a child's name above $416 a year can face tax rates of up to 66%, based on ATO 2025-26 rates.
- If no Tax File Number (TFN) is quoted, 47% can be withheld from most investment earnings, excluding franked dividends.
- Minors generally can't sign binding contracts, so an adult usually holds the investment as trustee until the child turns 18.
- Your TFN choice depends on 3 structures: the child's name, an adult as trustee, or a formal trust.
Is there a child trust fund in Australia?
Not a government one. Australia has no child trust fund scheme, so families usually invest for a child using one of three routes:
- An adult holding the investment as trustee for the child, often called a minor trust account.
- An investment in the child's own name.
- A formal trust set up with a trust deed.
Each route changes who pays tax, who controls the money and what happens when the child turns 18.
What is a minor trust account?
A minor trust account is an informal trust. An adult holds the investment "on behalf of" the child, and it might appear as Mr Bill Smith <Tommy Smith a/c>.
The adult is the legal owner, and no trust deed is needed. That keeps set-up simple, but it also means the adult is generally responsible for the tax.
How is a child's investment income taxed?
Special rules apply to income earned by under-18s, designed to stop adults shifting income to children. For residents, the ATO's 2025-26 rates are:
- $0 to $416: nil.
- $417 to $1,307: 66% of the amount over $416.
- Over $1,307: 45% of all income that isn't excepted income.
These are the 2025-26 figures, so confirm the current year's rates before you invest.
Who's taxed at adult rates instead? Children who are "excepted persons", such as some who work full-time or live with a disability, pay adult rates. So does "excepted income", including:
- Employment income.
- Income from a deceased estate.
- Compensation payments and lottery winnings.
Whose name should the investment be in?
- An adult as trustee: the adult's TFN is used, and earnings are generally taxed at the adult's rate. For grandparents, that may affect tax offsets or Centrelink assessments.
- The child's name: the child's TFN is used, and penalty rates may apply.
- A formal trust: the trust's TFN is used. It carries set-up and ongoing legal costs, so it tends to suit larger assets.
Watch the conditions you attach. If a gift comes with strings, such as the child must attend university, ownership may rest with the adult for tax purposes. Moving assets into the child's name later may also trigger gifting and CGT implications.
How do you buy shares for a child?
Buying shares for a child usually follows these steps:
- Decide on the structure: an adult as trustee, the child's name or a formal trust.
- Open the account with the adult named as trustee, in the format shown above.
- Quote the right TFN for that structure.
- Keep records of purchases, dividends and dates, which you'll need for tax and cost-base purposes.
- Plan for the transfer at 18, including any gifting or CGT implications.
Does regular investing help?
Many families invest a lump sum or a regular amount. Regular investing uses dollar-cost averaging, which means buying at different prices over time, and it may smooth your average cost. It doesn't remove market risk.
Read more about dollar-cost averaging versus lump sum investing.
What else do families consider? Some use insurance or education bonds, or a managed fund regular savings plan. Each has its own tax and access rules, so compare them with your adviser.
Do you need advice before investing for a child?
Tax, trusts and Centrelink rules overlap here, and mistakes can be costly to unwind. Morgans advisers aren't tax advisers, so your accountant should confirm the tax side. Our tax planning and financial planning services can help you connect the pieces.
For a closer look at how a minor trust account works in practice, read more about investing for your kids. If you're pulling together wider family goals, our guide to financial planning for a family is a good next step.
To talk through the right structure for your family, contact a Morgans adviser.
Frequently asked questions
Is there a government child trust fund in Australia?
No, Australia doesn't have a government child trust fund. Families usually invest through an adult-held account, an informal trust or a formal trust, so ask your adviser which fits your situation.
Is it better to invest in my child's name or my own?
In many cases an adult holding the investment as trustee is more tax-effective, because income in a child's name above $416 can face rates of up to 66%. Check your own tax position with your accountant first.
Can children legally own investments?
Minors generally can't enter binding contracts, which is why an adult usually holds the investment until the child turns 18. Ask your adviser how this works for your account type.
Do children need a Tax File Number to invest?
A child can apply for a TFN at any age, and without one 47% can be withheld from most investment earnings. Quote the right TFN for your structure when you open the account.
What happens when the investment is transferred to the child?
There may be gifting and capital gains tax implications, depending on ownership and control of the asset. Get advice before transferring, and keep clear records of purchases and dates.
