I am trying to figure out the rules for buying shares (or managed funds) on behalf of my kids. I have read the information on the ATO website on this (https://www.ato.gov.au/individuals-and-families/investments-and-assets/investing-in-shares/owning-shares/children-s-share-investments), as well as numerous questions and answers here, but I remain completely confused. I think the ATO website needs to be updated to address this.
The ATO website states:
"If the shareholder is the:
- child, quote the child's TFN
- parent, as trustee for the child, and
- no formal trust exists, quote the parent's TFN
- there is a formal trust, quote the trust's TFN."
The first part of this makes no sense. In Australia, a child cannot own shares directly, so the shareholder (assuming that means the legal owner) cannot be a child. However, according to this guidance, the only circumstances under which a child's TFN should be quoted is if the child is the legal owner - a situation that cannot occur.
The examples then further confuse matters - in particular example 2:
"Sara buys shares for her child, Michael, with money given to him for his birthday. Sara holds the shares for the benefit of Michael with the share broker until he turns 18. No formal trust deed has been created. Sara quotes Michael's TFN when she buys the shares."
Why does Sara quote Michael's TFN when Michael (the child) is not the shareholder? In this example, Sara is the shareholder, holding the shares in trust for Michael, and apparently no formal trust exists, so in accordance with the ATO guidance, shouldn't Sara quote her own TFN? Even if a formal trust did exist, then she should quote the trust's TFN.
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