Announcements
Worried you’re missing part of your refund? Remember, the low and middle income tax offset isn’t a refund on its own – it’s used to offset (or reduce) the amount of tax you pay. The offset amount you may be entitled to is automatically applied and could range between $255-$1080, depending on things like your taxable income and how much tax you’ve paid.
Still not sure? Ask the Community

ATO Community

Re: Child Trust Funds in the United Kingdom

Initiate

Views 135

Replies 5

hello folks,

 

We used to live aboard in Europe. Our children were born in the United Kingdom in the decade 2000-2009. Hence the UK government provided some GBP towards each eligible child. See www.gov.uk/child-trust-funds. Afterwards, we emigrated down under as one of their parents is an Australian citizen by birth. We are not UK tax residents, thus neither the parents or children can open new finanical accounts. We still have one active UK banking account and have used this to make additional contributions into these 3 CTFs, aka parental monetary gifts.

 

Now that each child is about to turn 18 years, the UK rules are that our non-resident child cannot retain the money onwards as they're unable to open a taxfree ISA. Nor open an UK bank account in their own name. Our child will need to contact their CTF provider with their AU bank account for an international bank transfer. These accounts have been listed with ATO as the regulatory reporting body as foreign residents over there.

 

Our question is whether each child have to declare their ex-UK money in their AU taxation return for when they turned 18 years? All incoming monies were gifts by UK government and their parents. Nobody else. Plus earnings gained or lost during their share-based CTF activity. Any helpful pointers?

1 ACCEPTED SOLUTION

Accepted Solutions

Most helpful response

ATO Certified Response

ATO Community Support

Replies 4

Hi @disabledsupport,

 

Firstly, your children will need to establish their residency for tax purposes.  As a resident of Australia for tax purposes they'll be taxed on their world wide income.  Foreign residents are taxed on Australian sourced income.

 

If the money is considered a genuine gift, it won't be taxed.

 

A similar question has been asked on this platform with some excellent information.

5 REPLIES 5

Most helpful response

ATO Certified Response

ATO Community Support

Replies 4

Hi @disabledsupport,

 

Firstly, your children will need to establish their residency for tax purposes.  As a resident of Australia for tax purposes they'll be taxed on their world wide income.  Foreign residents are taxed on Australian sourced income.

 

If the money is considered a genuine gift, it won't be taxed.

 

A similar question has been asked on this platform with some excellent information.

Initiate

Replies 3

thank you CaroATO,


Our children are Australian tax residents, so yes - anything they get from overseas would be taxable unless such money are gifts. I checked out your referred link: receiving money gift from overseas friend

 

That talked about gifts from relatives or personal friends. Umm, if governments or organisations give $$ without anything being expected in return, or for absolutely no other reasons (e.g. benefits, business grants) - can one assume that such money (UK govt contributions) towards child trust funds are still considered as gifts? Or treated as income or taxable benefits?

ATO Community Support

Replies 2

Hi @disabledsupport

 

From my reading on Children Trust Accounts, it seems like it's just a special type of children's savings account.

 

This means as funds are earned, that's when it becomes reportable, not when the child gets their access to the funds.

 

It also means it depends on whose responsible for the account as to who reports the income - the parent or the child. If you're responsible and decide how the funds are spent, it'll be your reportable income. If a formal trust exists, you'll report it on the trust's return. If no formal trust exists, you'll report it on your personal return.

 

You can read about Children's savings accounts more on our website.

Initiate

Replies 1

Thank you. From your explainations and the quoted ATO article, we will take "interest earned as declarable income" - including gains made on the sharemarket - since our children's UK-based Child Trust Funds are in the "stocks and shares" (their language). 

 

Parents have no access to any of these money at all, they all belong to the children. Once cashed out at age 18, the UK CTF provider sends a cheque or bank transfer to the child's AU bank account as long as that is in the child's sole name and not jointly held with anyone else. But since there is no "Australian trusts" holding these, we ought to declare these on either parent's AU taxation return - that is what is implied in the quoted article? And yet the last paragraph of that article says that the earnings are considered to be the child's - aka be declarable on the child's ATO account? 

 

This is more relevant to us = Children's share investments - both examples 2 and 3. Might ask for a private ruling, to sort that out?

Community Moderator

Replies 0

Hi @disabledsupport,

 

Have a chat to our Early Engagement team who will be able to assist with a private ruling which I think is the best way to go.