A child is eligible from birth for a TFN from the ATO. If your child is under 16 (at the start of the calendar year) and does not supply their TFN to the bank or share registry, then 45 per cent tax will be withheld on interest earnings over a threshold of $420 as well as on all unfranked dividends. If your child is aged 16 and over, then the threshold is reduced to $120.
Children do not need to lodge a tax return if their assessable income is less than $416. However, if tax has been withheld from them by an investment body or employer, then they must lodge a return in order to get that money returned to them.
If you have an adult child who has a job while going to university or TAFE then they may be able to claim a deduction for certain expenses if there is a sufficient connection between their course and their assessable income. Some expenses that they might be able to claim in this instance include:
depreciation of assets (such as computers, desks and bookshelves) used for studying purposes
journals and periodicals
photocopying and printing costs
stationery
textbooks
travel from work to place of study.
They wouldn't be entitled to a deduction for any tuition fees payable under HELP or any repayments of outstanding HELP debts.
Earnings from a child's investments must be declared by the person who rightfully owns and controls the investment, not the person whose name it is in, or whose name it is held in trust for. This is regardless of whether the money is spent on resources for the child.
Sarah opens an account for her three-year-old daughter, Samantha, by depositing $8000. Sarah is signatory to the account and she also makes regular deposits and withdrawals to pay for Samantha's preschool expenses. The ATO would deem that the money belongs to Sarah and any interest earned from this account must be declared for tax by her.
If the funds in the account are made up of money received as birthday or Christmas presents, pocket money or savings from part-time earnings such as newspaper rounds, and these funds are not used by any person other than the child, then the interest earned is the child's income.
Children are not eligible for the low-income tax offset against unearned income, such as interest. The rebate can only be offset against excepted income.
5 PAYMENTS FOR NEW PARENTS
There are a few government payments available when becoming a mum or a dad.
Paid parental leave
Eligible working parents of children born or adopted may be entitled to the paid parental leave scheme to help them care for a new baby. The pay is for up to 18 weeks at the national minimum wage (currently $772.60 per week before tax) and is paid by either your employer or the government (where employers do not provide parental leave entitlements). You can claim for paid parental leave up to three months in advance.
To be eligible you must have worked at least 330 hours across 10 of the 13 months prior to the birth of your child, but your annual salary must also be less than $151 350 The work test has been extended so that mothers can count periods of paid parental leave they've taken for earlier births as ‘work’.
Paid parental leave is subject to income tax and may also affect other government benefits such as child support, health care cards and public housing. In contrast, the Newborn Upfront Payment and Supplement is not taxable and not considered income for family assistance or social security purposes. For more information on paid parental leave go to https://www.servicesaustralia.gov.au/individuals/services/centrelink/parental-leave-pay.
Parents are prevented from ‘double-dipping’ into parental leave, where they have simultaneous access to employer-funded benefits at the same level or more than the government scheme. If the employer-paid leave is less, then they will only receive the difference.
For children born after 1 March 2014, Family Tax Benefit Part A recipients may be entitled to a $575 Newborn Upfront Payment and up to $1725.36 for a Newborn Supplement (reduced to $1151.03 in total for subsequent children), payable via normal fortnightly payments over a three-month period. These payments are not taxable.
Dad and partner pay
To help partners bond with their new baby, eligible working partners of children born or adopted after 1 January 2013 may be entitled to a single ‘dad and partner pay’. It is a one-off payment of up to two weeks at the national minimum wage (currently $772.60 per week before tax).
To be eligible you must have worked at least 330 hours across 10 of the 13 months prior to the birth of your child, but your annual salary must also be less than $151 350. You can be eligible if you work full time, part time, casually, seasonally, on contract or in a family business. You cannot be working or receiving paid leave during the period of claiming the dad and partner pay.
In addition to dad and partner pay, families may be eligible for other family assistance such as paid parental leave and the Family Tax Benefit.
The 2022-23 federal budget has proposed that the 18 weeks of paid primary carer leave and the two weeks of dad and partner pay will be combined into an entitlement of 20 weeks of paid parental leave that can be divided between parents as they choose by 1 March 2023.
Claims must be lodged by the partner who is eligible to receive the payment. You can claim the dad and partner pay up to three months in advance or within a year following your child's birth or adoption. Employers are not required to pay this entitlement as it is solely administered and paid by Services Australia.
6 CHILD CARE
Ask the parents of any young child and they will tell you that their biggest expense is child care. If you have a child who is attending child care services approved by, or registered with, the government you may be eligible for the Child Care Subsidy (CCS). You can apply for the benefit at the Family Assistance Office. The amount you receive will depend on the type and amount of care that you use, your income, the reason you are using care and the number of children that you have in care.