3 hours ago
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May 24, 2026 — 5:16am
I’ve noticed that when the question comes up about establishing an investment for kids (usually with a future home deposit in mind), nobody talks about starting the kids a super account in this context. It feels like there would be benefits – if the income is streamed to the kids from a family trust, the kids could avoid paying tax by putting it in as a concessional contribution.
Then, if the deposits into super are earmarked as super saver scheme-eligible, the money can grow tax-free. My kids are 10 and 12. But nobody talks about this approach and I assume there’s a good reason. Where does this approach fall down?
Thanks for your question and observation. It is true that super doesn’t tend to come up much in these discussions.
There are a couple of aspects where your strategy breaks. Firstly, your kids can’t make concessional super contributions because they don’t have any earned income. Family trust distributions don’t satisfy this requirement. Distributions made to kids under 18 therefore get caught by the minor tax rules, which are harsh.
Let’s say you made these distributions anyway, paid the tax, then contributed the funds into super as a non-concessional contribution. Earnings within super are then taxed at 15 per cent, so they aren’t tax-free as you indicated.
Now this money is locked up in the super system and inaccessible until at least age 60, with the primary exception of the first home super saver (FHSS) scheme, where voluntary super contributions can be released to contribute towards a home deposit.
But what happens if your kids don’t buy a home? Or if they need the money for some other purpose? Also, the maximum that can be withdrawn under FHSS is $50,000 per person.
I’ve noticed that the US sharemarket has been performing strongly recently, while our local market has been struggling. Should I be allocating more of my investment money to the US at the moment?
The US market has been performing strongly, driven by optimism around the impact of artificial intelligence (AI), and a pro-business environment. The US market has a high degree of concentration in the tech sector, with the top companies, sometimes referred to as the “Magnificent Seven”, making up about 30 per cent of the S&P500 index.
Increasing your exposure to the US market, therefore, would be a bet on the success of the tech sector, at least in the short to medium term.
Our market is also heavily concentrated, with financials (banks) making up more than 30 per cent of the ASX200, and resources companies about 25 per cent. The 10 largest companies in Australia make up more than 45 per cent of our index.
Morningstar wrote a piece recently that highlighted the unintended risk Australians might be taking in holding the bulk of their wealth in residential property and Australian shares. The property market is driven by our economic success, which drives up wages and wealth.
That economic success is to a large degree driven by our commodity exports. If there was a hiccup on that front, commodity stock prices would be expected to fall, and house prices may decline as the economy slows. That could knock on to mortgage defaults, which would be bad news for your bank stocks.
Suffice to say, diversifying your portfolio beyond our shores makes a lot of sense. As to how you should be directing your investment money right now – that’s a discussion to be had between you and your financial planner, informed by your goals and existing holdings.
Paul Benson is a Certified Financial Planner at Guidance Financial Services. He hosts the Financial Autonomy podcast. Questions to: [email protected]
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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