Question: I have eight grandchildren from age 10 down to 14 months. Unfortunately when I opened a CHESS account to buy shares for them, I put the chess register under my name as trustee for each child. My problem is I still earn an income and my partner does not. Who pays the tax if I sell the shares: my partner or me? This problem came about because I purchased LNG shares at 38c for the two oldest children and they are now $3.25 and I want to sell half. They have only held these shares for five months.
Answer (By Paul Rickard): I am not sure I follow how you have registered the shares in CHESS. However, it is most likely that your grandchild will be liable for any capital gains tax – not you or your partner. It all depends on the situation. If the child is legitimately the owner of the shares and all the income through dividends goes back to the child, then they will be liable for any tax. The first $416 of income will be tax free – after that, the effective tax rate is 66%. I have attached the ATO’s link that provides different examples – see situation two here.
There is a link here to a copy of an article we published on this subject in January that explains the best mechanisms to buy shares for children or grandchildren.