Kickstarting an investment portfolio for your children can be a great way to give them financial assistance in life, and even get them interested in investing. There are a number of ways this can be done.
A share portfolio can be opened in your childrens’ name, with you as the adult trustee of the account. While this approach is simple, you need to be aware that interest and dividends earned in a child's name can be taxed as high as 66%—that’s a big hit.
Insurance bonds are another option when investing for your children. During the term of their investment, they don’t create any additional tax burden in your name or your child’s name. If you hold them for 10 years or more, there’s no tax payable when you convert back to cash, which you can then pass on to your children tax-free.
Another common approach is to buy a parcel of shares for your children within an SMSF. This allows the shares to grow in a tax-efficient environment. When you reach age 60, it’s then possible to sell or transfer the shares out of your SMSF, while paying $0 tax.