Children’s Savings Calculator Australia

What the childrens savings calculator does

The childrens savings calculator projects a child's account forward to the year the money is needed, and then does the part most savings calculators leave out: it taxes the interest. Interest paid to a person under eighteen is unearned income, and Australia taxes a minor's unearned income at deliberately punitive rates unless an exception applies.

Enter the opening deposit, what you add each month, the interest rate and the number of years, and the tool returns the balance before tax, the total interest, the tax charged on that interest, and the balance you are actually left with.

Why a child's savings are taxed differently

Division 6AA of the Income Tax Assessment Act was written to close a simple loophole. Without it, a parent on a high marginal rate could hold an investment portfolio in a child's name, use the child's tax-free threshold, and pay almost nothing on the income.

The response was to strip the tax-free threshold from a minor's unearned income and replace it with a small first band. Beyond that band the rate jumps sharply, and past a second threshold the whole amount, not just the excess, is taxed at the top rate. The steps are:

• A first band of interest each year that is free of tax.
• A middle band where only the excess above the first band is taxed, at a very high rate.
• Above the second threshold, the entire amount is taxed at the top marginal rate.

The rates and thresholds are held as a parameter and updated from the ATO, which is why the tax-free figure appears as an output rather than being written into the text.

Unearned income and the exceptions

The penalty rules apply to unearned income: bank interest, dividends, distributions from a family trust, rent. They do not apply to money a child earns from a job. Two kinds of exception exist, and they matter a great deal to the result:

• An excepted person. A minor who works full time, or who is disabled, or who receives a disability support pension, double orphan pension or carer allowance, is generally taxed at ordinary adult rates on everything.
• Excepted income. Certain income is taxed at adult rates even for an ordinary minor. The common cases are income from a deceased estate, income from property transferred as a result of a death or a family breakdown, compensation for injury, and income from the child's own earnings.

Select the excepted option in the calculator and it switches from the penalty bands to the resident brackets. Because the resident brackets start with a tax-free threshold far above any realistic school savings account, the tax normally drops to nil.

Whose name should the account be in

There are three practical structures, and the calculator prices all three:

1. In the child's name. Simple, and the money is legally the child's. Fine while the annual interest stays under the first band, expensive once it does not.
2. In a parent's name, informally held for the child. The parent declares the interest and pays their marginal rate on all of it. Above a moderate balance this is often cheaper than the penalty rates. The trade-off is that the money is legally the parent's and forms part of their assets.
3. A formal trust. Better protection and flexibility, but with setup cost, an annual return and the same Division 6AA treatment on distributions to a minor beneficiary.

The rule of thumb the numbers usually produce: while the account earns less than the first band each year, the child's name wins. Once it earns more, compare the penalty result with the parent's marginal rate before deciding, because the 66 per cent step is steep enough to swamp a small rate advantage.

How the projection works

Interest compounds monthly on the running balance. Contributions land at the end of each month, so the first month's interest is earned only on the opening deposit. Any yearly lump sum, a birthday or Christmas gift for example, is added at the end of the year.

Each year's interest is assessed on its own. That matters, because the tax is charged year by year rather than on the total at the end. A balance that produces two hundred dollars of interest in year three and eight hundred in year ten is taxed at nil in year three and at penalty rates in year ten.

By default the tax is withdrawn from the account, so it stops compounding. Untick that option in the advanced settings if the family pays the tax from elsewhere, and the projection keeps the full balance growing.

Things the projection does not model

• The interest rate is treated as constant. Real bonus-saver accounts pay a headline rate only in months where you deposit a minimum and make no withdrawals, so an average is often the honest input.
• The Medicare levy is not applied. A minor with only interest income is well below the levy thresholds in the amounts this tool models.
• No allowance is made for tax withheld because a TFN was not quoted; that is a cash-flow timing question rather than a final cost, since the amount is recoverable in a return.
• Government or bank bonus schemes, and any interest-rate promotion, are excluded.

Getting the most from a kids account

• Set up an automatic monthly transfer. Most children's accounts pay their bonus rate only when a deposit is made every month and nothing is withdrawn.
• Quote the child's tax file number so the bank does not withhold at the top rate.
• Watch the first band. If the annual interest is creeping towards it, that is the moment to compare structures rather than after a penalty assessment arrives.
• Keep a record of who contributed what. If the money is ever treated as the parent's, that record is what supports the argument that it was always held for the child.

Estimate only

This childrens savings calculator produces an estimate, not tax advice. Whether a child is an excepted person, whether income is excepted, and who is properly assessable on an account held for a minor are questions of fact that depend on the family's circumstances. Confirm your position with the ATO or a registered tax agent before relying on the numbers.

About This Childrens Savings Calculator

Use this childrens savings calculator to get an instant, accurate estimate. The figures follow official ATO guidance and every rate and threshold is kept up to date for 2026. Adjust the inputs above to match your situation, or browse all our calculators to plan your next step.