# Investing for children's education



## Aussiesteve (8 June 2013)

I assume the best way to invest for my children is to start up an account in their name - meaning that there will be no tax as would be the case if set up in my name? Out of curiousity, what's to stop people claiming that they are doing this when in fact they intend to use the money for their own use?


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## FlyingFox (8 June 2013)

*Re: Children's education*



Aussiesteve said:


> I assume the best way to invest for my children is to start up an account in their name - meaning that there will be no tax as would be the case if set up in my name? Out of curiousity, what's to stop people claiming that they are doing this when in fact they intend to use the money for their own use?




This "loophole" has been closed for quite some time and now pretty much completely.

http://www.ato.gov.au/individuals/content.aspx?menuid=0&doc=/content/20046.htm&page=4&H4

Basically for any non employment income above $1307, the tax rate is 45%.

There are some exclusions in this but I would see a tax accountant before doing this especially if it is a large sum.


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## qldfrog (9 June 2013)

worse than this the tax rate for kids is much higher than 45% once their income is above a ridiculously low amount.
I am taking the money back from my 14y old son under my name to allow him not to be slaughtered by the ATO.
There is no loop hole there, just a current government JG habit of stealing $ from inactive accounts or baby account or super account and soon straight from your pocket if we let them...


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## waimate01 (9 June 2013)

*Re: Children's education*



FlyingFox said:


> This "loophole" has been closed for quite some time and now pretty much completely.




It's pretty straightforward to get around, but it does involve someone dying (testamentary trust)


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## McLovin (9 June 2013)

*Re: Children's education*



waimate01 said:


> It's pretty straightforward to get around, but it does involve someone dying (testamentary trust)




Yep. If the OP knows of a relative who is near death, gift the money to them and have them leave the amount in a testamentary trust.

Or you could just create a discretionary trust and have the children as beneficiaries. Stream the income to adults instead of minors.


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## matty77 (9 June 2013)

start a bankwest account, transfer $50 per week in = win.


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## WilkensOne (10 June 2013)

*Re: Children's education*



McLovin said:


> Yep. If the OP knows of a relative who is near death, gift the money to them and have them leave the amount in a testamentary trust.
> 
> Or you could just create a discretionary trust and have the children as beneficiaries. Stream the income to adults instead of minors.




Does anyone know what the rough costs of a discretionary trust are? Also is there the option to add new beneficiaries as required or would that require a new trust to be created?


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## slooi1 (10 June 2013)

*Re: Children's education*



WilkensOne said:


> Does anyone know what the rough costs of a discretionary trust are? Also is there the option to add new beneficiaries as required or would that require a new trust to be created?




Costs of a discretionary trusts are:
Trust Deed - Approx $150 upwards depending on whether you go online or through a lawyer
Stamping - Depends on the state. Victoria's is current $200
Annual Return - Cost of your accountant / or your time if you do it yourself

You'll face a few headaches in the first year as you set up everything (GST/Annual Tax/Bank Accounts/ABN etc) but the flexibility makes it worthwhile.

Adding new beneficiaries - depends on your trust deed.

slooi1


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## Julia (10 June 2013)

I'm just wondering why there's a need to set up any sort of special entity in order to save for anything in particular?

Isn't it reasonable to just work out the amount involved and put this into a high interest account monthly, annually or whatever?


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## Vixs (10 June 2013)

Julia said:


> I'm just wondering why there's a need to set up any sort of special entity in order to save for anything in particular?
> 
> Isn't it reasonable to just work out the amount involved and put this into a high interest account monthly, annually or whatever?




A trust for this purpose seems like total overkill unless you are trying to make sure your accountant stays in business.

There is some merit for people with high marginal tax rates to consider investment bonds though. My issue with that is the fees are a little uncompetitive due to being a niche, but that's only from what I've seen in my very basic searches. I am still looking for an investment bond I'd happily invest in if the time was right.

It's all a matter of what the individual can do in their circumstance.

Bob & Tracy with a household income of $550,000 are going to be approaching things differently to Matt & Rachel on $90,000.


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## matty77 (12 June 2013)

Julia said:


> I'm just wondering why there's a need to set up any sort of special entity in order to save for anything in particular?
> 
> Isn't it reasonable to just work out the amount involved and put this into a high interest account monthly, annually or whatever?




100% agree as per my original post.

even those "education savings account" things are crap.

just find the highest interest account and chuck it in there, easy and flexible if you ever want the money back!


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## qldfrog (12 June 2013)

as long as ity is not in the children's name.
Easy when 3y old, not as good when they are teens and you would like to teach them money/ownership


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## FlyingFox (12 June 2013)

*Re: Children's education*



waimate01 said:


> It's pretty straightforward to get around, but it does involve someone dying (testamentary trust)




LoL. Personally that is not very straight forward. Also depending on amounts involved, you might incur the wrath of the ATO if they ever dig.


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## AllenPivot (7 March 2014)

Hello guys please suggest me i wanted to invest money on some funds for my son career. 
Can you suggest me what are the funds suited for me,.,.
Thanks in advance all,.


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