UGMA Accounts in Australia: 2025 Guide for Parents & Investors

Looking to invest for your child’s future? UGMA accounts, a staple of financial planning in the United States, are now gaining attention among Australian families. But what exactly are they, and do they have a place in our financial landscape?

What is a UGMA Account?

The Uniform Gifts to Minors Act (UGMA) account is a custodial investment account designed for minors. While UGMA accounts originated in the United States, their core concept—allowing adults to gift assets to children in a tax-efficient, structured way—has sparked interest in Australia, especially as families seek new ways to build wealth for future generations.

In the US, a UGMA account lets parents, grandparents, or other adults transfer stocks, bonds, cash, or mutual funds to a minor. The assets are managed by an adult custodian until the child reaches the age of majority (typically 18 or 21, depending on the state). At that point, full control passes to the young adult, who can use the funds for any purpose, from university fees to a first car.

• Key Features: Tax-advantaged investment growth; flexibility in asset types; no strict use restrictions.
• Limitations: Irrevocable gifts; loss of parental control at majority; possible impact on financial aid eligibility.

Are UGMA Accounts Available in Australia?

Australia does not offer UGMA accounts per se, but several structures achieve similar goals. These include informal trust accounts, family trusts, and dedicated investment products offered by major banks and platforms. The growing popularity of micro-investing apps and online brokerages has also made it easier to set up custodial-style arrangements for minors.

Key differences and local adaptations in 2025:

• Taxation: In Australia, investment income for minors (except from work) is taxed at higher penalty rates to prevent income splitting. However, gifts to minors via trusts or formal arrangements can still deliver long-term benefits if structured carefully.
• Regulation: ASIC and the ATO have increased scrutiny of child investment accounts in 2025, with new guidance for platforms offering custodial services. Providers must now clearly disclose who controls the funds and at what age the child gains access.
• Alternatives: Family discretionary trusts and education bonds remain popular for families seeking tax efficiency, flexibility, and more control over when and how funds are accessed.

For example, CommBank and Vanguard both allow parents to invest on behalf of children, with the adult acting as trustee or legal owner until the child turns 18 or 21. The funds can be earmarked for anything, but tax implications must be carefully considered.

Pros and Cons for Australian Families

Should you set up a UGMA-style account (or its Australian equivalent) for your child? Here’s what to weigh in 2025:

• Pros:
  • Encourages early investing and financial literacy for children
  • Potential for tax-effective long-term growth (if managed correctly)
  • Flexible use—funds aren’t locked to education or specific costs
  • Simple gifting process; assets can be transferred without complex legal paperwork
• Cons:
  • Income penalty tax rates for minors can erode returns
  • No control over how funds are spent once the child reaches legal age
  • Possible impact on government benefits or student assistance
  • Complexity in reporting to the ATO, especially if using informal structures

Real-world example: A Sydney family set up an investment account in their daughter’s name when she was 5, contributing $2,000 per year. By the time she turned 18, the portfolio had grown to over $50,000, giving her a head start on university expenses. However, they worked closely with their accountant to manage tax on investment income, ensuring they didn’t fall foul of ATO rules.

2025 Policy Updates and Industry Trends

This year, the Australian government is reviewing minor investment account regulations as part of a broader push for financial literacy and consumer protection. ASIC’s 2025 guidelines clarify that all custodial account providers must:

• Clearly state the age of asset transfer and conditions for access
• Provide transparent disclosure on tax treatment and reporting obligations
• Implement robust identity verification for both the child and custodian

Additionally, several fintechs are trialling “family investing” apps, allowing parents to automate micro-investments for each child, complete with educational resources and milestone features.

Conclusion: Should You Consider a UGMA-Style Account?

While UGMA accounts are not formally available in Australia, their spirit lives on through a range of custodial investment options. If you’re keen to build a nest egg for your child, it’s crucial to understand the local tax, legal, and practical implications. With new rules and products emerging in 2025, now’s the time to review your strategy—and ensure you’re making the most of every opportunity to set your family up for success.