Home › Blog · 2026-10-27

Kids' Savings Accounts and Tax in Australia: TFNs, Interest and the $416 Rule

Opening a savings account for your child is one of the best money habits you can start. But the tax rules for kids' interest are different from the adult rules, and getting the TFN question wrong can mean your bank holds back a big slice of the interest. Here's what the Australian Taxation Office (ATO) says, in plain English.

Figures below are from ato.gov.au, checked 27 October 2026. Rules can change, so check the ATO's children's savings accounts page before you act.

Does my child need a TFN for a bank account?

It depends on their age and how much interest the account earns in a year:

• Any age, under $120 interest a year: the bank won't withhold tax.
• Under 16, between $120 and $420 a year: give the bank either your child's date of birth or their TFN, and it won't withhold tax. They also don't need to lodge a tax return.
• Under 16, $420 or more a year: the bank needs their TFN. Without it, the bank withholds tax at 47%.
• 16 or 17, $120 or more a year: without a TFN, the bank withholds tax at 47%.

The ATO treats a child as under 16 until the end of the calendar year they turn 16. There's no minimum age to apply for a TFN, so even a baby can have one.

One catch: if tax is withheld, it's worked out on all the interest, not just the part over the threshold. To get it back, you'd need to lodge a tax return for your child.

Who pays tax on the interest?

This surprises a lot of parents. The ATO says it doesn't matter whose name is on the account. What matters is who provides the money and who decides how it's spent.

• If you put the money in and spend it as you like, the interest is yours to declare in your tax return.
• If the money is genuinely your child's, such as pocket money, birthday money or gifts that are theirs, the interest is theirs.
• On a joint account, interest is split equally between the account holders.

Kids' tax rates on interest

Minors (under 18 at 30 June) pay special higher rates on "unearned" income like interest, to stop adults moving income into their kids' names. For Australian residents in 2025–26, the ATO's rates are:

• $0 to $416: no tax
• $417 to $1,307: 66% of the amount over $416
• Over $1,307: 45% of the whole amount

Income a teenager earns from their own job is usually "excepted income" and taxed at normal adult rates instead. The ATO's under-18 tax rates page has the full detail.

What this means for most families

For a typical kids' account holding birthday and pocket money, the interest is usually well under these thresholds. Giving the bank your child's date of birth (or TFN) when you open the account is the simple step that stops tax being withheld. If the balance grows large, or you're the one funding it, talk to a registered tax agent.

Turning the account into a money lesson

• Use Spend, Save and Give jars so your child sees where their money goes.
• Link chores or pocket money to a weekly routine. Our pocket money chart guide has age-by-age ideas.
• Show them the interest when it lands. It's the best way to explain compound growth.
• Set a savings goal with a picture, like a bike or a holiday treat, and tick it off together. A kids' version of a savings challenge works well.

The Pocket Money Jars app handles the chores, weekly ticks and jars in your browser, with the data kept on your device.

FAQ

General information only, not financial or tax advice. Check ato.gov.au or a registered tax agent for your situation.