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 and if there is a formal trust, quote the trust's TFN.
If you do not quote a TFN, pay as you go (PAYG) tax will be withheld at 47% (from 1 July 2017) from the unfranked amount of your dividend income.
DECLARING DIVIDENDS
Whoever rightfully owns and controls the shares declares the dividends and any net capital loss or gain from the sale of shares. You need to consider who provides the money for the shares, makes share decisions and spends the dividend income. If there are large amounts of money or a regular turnover, you might need to examine the ownership of the shares further, including finding more information to work out who should declare the dividends.
LODGING A TAX RETURN
If your child owns shares and earns more than $416, you must lodge a tax return on their behalf. If your child earns $416 or less, you may also want to lodge a tax return on their behalf if too much PAYG tax was withheld and claim a refund for franking credit by lodging a tax return or completing an Application for refund of franking credit.
Examples
Alexander withdraws $3,000 from his own bank account to buy shares in the name of his daughter Emma. He deposits the dividend of $200 into his own bank account and uses it for his own personal expenses. Alexander declares the $200 on his tax return. When he sells the shares, he will also declare any capital gain or loss.
Michael withdraws $5,000 from his bank account to buy shares in the name of his son Jonathon. He quotes Jonathon's TFN when he buys the shares. Michael makes all the decisions about those shares as Jonathon is only three years old. All dividend income and any profit from the sale of those shares are deposited into a bank account in Jonathon's name with Michael as trustee. The dividends and capital gains are declared on Jonathon's tax return.
Jennifer buys shares on behalf of her daughter, Tamara, with money saved from Tamara's part-time job, plus money received for Tamara's birthday. Tamara and Jennifer decide not to quote Tamara's TFN. Dividends of $300 are deposited in Tamara's bank account. Tamara declares the $300 on her tax return. When those shares are sold, any capital gain or loss from the sale will belong to Tamara.