Can I set up a super fund for my kids?


It's possible to set up a super fund for under-18s. The bigger question is, should you?

According to Australian Tax Office data, over 40,000 boys and more than 35,000 girls aged under-18 already have their own super accounts.

What's more, they're punching above their age when it comes to healthy balances.

can i set up a super fund for my children

The average balance for a boy aged under 18 is $14,170 - almost double the average super savings of $8,072 for males aged 18-24.

So we're talking about some pretty well-heeled kids.

Not all super funds offer accounts to under-18s, but some, such as Sunsuper, do.

Setting up a super fund for kids

Where a fund accepts minors, the process of account opening is reasonably straightforward. A grown-up will need to complete the membership paperwork, and as minors aren't legally able to sign contracts, an adult needs to provide proof of being a parent or legal guardian and authorise the child's membership application.

It's also worth organising a tax file number (TFN) for the child as part of the account opening process.  The Tax Office cautions that without a TFN, a super fund will not be able to accept any non-employer contributions.

Super may not be ideal for giving kids a financial head start

Well-meaning parents or grandparents may consider setting up a super fund for a child as a way to build a youngster's future wealth. And yes, the compounding returns could be impressive by the time the child reaches retirement age.

But there are issues to consider.

While parents and grandparents can usually contribute to a child's super fund, they won't normally get a personal tax deduction or offset from the contribution. An exception may be where the child is employed in a family-owned business.

The deal-breaker can be that children can't generally access their super until they reach age 60. That could be half a century away. Chances are, youngsters will appreciate more accessible sources of cash as they grow up, to fund goals like TAFE or university studies, a gap year, or to buy a first home.

When it makes sense to set up super for kids

It's a different story if your child is starting a job. Under-18s who earn $450 or more (before tax) in a calendar month and work more than 30 hours in a week, are entitled to employer-paid super contributions.

The $450 per month threshold is set to be removed from July 1, 2022, but there has been no mention of any change to the 30-hours per week requirement.

So, if your child has a part-time job where they work just a few hours weekly, they may not be eligible for employer super contributions. That said, it could still be worth setting up a super account as the child may work longer hours during school holidays.

What to watch for

If you do set up a super fund for a child, be sure to keep an eye on fund fees, which can eat away at low balances.

Student Super, which focuses on super for younger Australians, charges zero fees on balances under $1000, plus a 50% discount on admin fees on balances between $1000 and $4999.

The benefits of starting a child's super fund

One of the biggest pluses of setting up a super fund for kids, especially as they approach workforce age, is the chance for youngsters to take ownership of their super and stick with the same fund for life.

It's also an opportunity for parents or grandparents to have conversations with kids about what super is, and why it matters - even if the money can't be accessed today.

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A former Chartered Accountant, Nicola Field has been a regular contributor to Money for 20 years, and writes on personal finance issues for some of Australia's largest financial institutions. She is the author of Investing in Your Child's Future and Baby or Bust, and has collaborated with Paul Clitheroe on a variety of projects including radio scripts, newspaper columns, and several books.
Jenny Smith
November 20, 2021 2.47pm

I set up a super account for each of my two children when they were starting high school. They are now working adults. Be aware that when they start their working life and contributing to Super for themselves, the one thing I did not know about when I opened their Super account is that they will not be automatically opted in to Income Protection once they are of working age. Therefore, if they want Income Protection they have to pay more for a 'tailored' income protection inside the super fund or find a competitive option outside of Super and then at least they can claim some back on tax. I felt this was very unfair but the Super Fund would not come to the party and transferring to another fund does not change the circumstance at all.

Sam Smith
November 27, 2021 10.33am

I set up a QSuper account for my twin daughters when they were 7.

The process involved calling, getting a form sent then applying and scanning it back to them as an email. It was mandatory to get a TFN which involved making a booking with and a trip to the local post office.

As I have them invested domestically in VAS in Super I have them 100% in the International equities option and contribute $250 a quarter. The fees are 0.26%p a and last year this portfolio did 35.66%

My wife thinks I'm mad but I like to think when I am long gone these dollars will still be compounding tax effectively at multiples of todays value.

Michelle Prosser
March 16, 2022 5.02pm

Hi Sam Smith, does your after-tax contribution to your daughters super of $1k per year make them eligible for the government contribution of $500? The Government usually pay your super fund within 60 days of you lodging your tax retunr - so i asking if you lodge a tax return on behalf of your girls?

Tom Anderson
August 13, 2022 8.37pm

I would think that a 7-year-old would not be eligible for the government contribution. One requirement is "10% or more of your total income must come from either: employment-related activities carrying on a business a combination of both.", which is not generally achievable as a child who doesn't work.