Slightly OT for this group, but if anybody knows the answer, somebody here must surely know.

I started investing as a trustee for my child some years ago, and set up a Pearler Account with an informal trust i.e., shares are legally owned by Parent as Trustee for the Child.

As per previous post, it's most Berkshire and a few ETFs.

At the application stage, I quoted the child's TFN, but somehow Pearler/Open Markets screwed up the application and my TFN got quoted.

The first year, I was surprised I had to pay tax in my name, so asked what happened and Pearler said no error on their end, check with your accountant. So I did and the accountant said that's how such an informal trust arrangement should work.

I didn't question it for a further two or three l years until Pearler emailed me out of the blue and said 'Sorry we messed up and quoted the wrong TFN even though you provided your child's TFN. We can't tell you what to do, but our account allows for transferring ownership at age 18 so you have not experienced any loss'.

So I ask my accountant whether I can change the TFN now, and he says, no, it's a CGT event if you do. By this time, the portfolio is up 20% or so, and paying CGT is going to be a capital loss of half that. The CGT is a five figure sum - not insignificant.

I ask Pearler how they are going to rectify this on account of their stuff up, and they say 'not our problem'.

I ask the accountant whether I should cut my losses and change the TFN, so that I don't have an even bigger CGT event in my own name when the child turns 18. To my surprise, I am told no, that would not be a CGT event, unlike a TFN change before age 18.

So I've left it for another 18 months until reading today about a similar structural issue in another person's portfolio held as trustee for the child, resulting in a large CGT event at the top MTR. AskATO/ATO community website is suitably useless.

The capital gain today is edging 40%, so a much more significant sum if I have to pay CGT to correct the error.

So which is it?

Is owning assets in an informal Trust arrangement enough to prevent a CGT event upon transfer of shares at age 18, even if then TFN is changed at that time?

I'm resigned to paying tax on income (negligible anyway) until the child turns 18 if it is a CGT event to change the TFN before age 18.

I just don't want to pay CGT in my name at the top MTR given the intention of structuring it this way was to avoid the CGT event until the child sold the shares in smaller lots later in life.

I don't want to gift money to them at age 18, I want them to own the own assets, otherwise I wouldn't have bothered.

Any wiser heads or tax gurus in this group know what the answer is?

I have been sitting on a small sum that the kids grandfather transferred us for them a few years ago. Having heard Scott on the MF podcast and seen this conversation, I made my first tentative steps into investing for my children this week. They have about $7k each to invest - took the view that I'd give them 3 stocks to pick and invest about $2k in those picks and then split balance between an Australian index ETF and a NASDAQ ETF. So far my son (9 year old going on 10) has said he wanted "Kmart" and Tesla - my daughter (7 year old going on 15) "Smiggle", "Kmart" and Mr Toys (I have no idea if this can even be bought). So I bought about $600 worth of WES for son and daughter and $600 of PMV for daughter. So it's really day one today. Talking my son through the purchase (we are down about $12 so far on WES).

Me: So I bought you those shares in Kmart we talked about - it's actually a company called Wesfarmers - did you know it owns Bunnings as well?

Son: Great - so how many shares do I own?

Me: 13

Son: So if there's 14 shares in the company do I own most of it?

Me: Yes that would be technically right...buuuut there's more like 750 million shares so you don't own a lot, but you do own a small piece of it.

Son: (completely ignoring me) so I own most of Kmart now...when can I buy most of Tesla?

Me: as soon as I set you up on international trading, but there's like a gazillion shares, so you won't own much of that either.

Son: Awesome! So when I own most of Tesla, I'll be the richest kid in the world...

Me: Sigh....

Off to a good start!

I looked into this a while ago as I wanted to give nieces and nephews some shares on milestone birthdays - 13th ($500), 18th ($1k), 21st ($1k) to hopefully provoke an interest in investing.

I found it too difficult to do this directly so I simply set up a separate brokerage account with low brokerage charges - I used Bell Direct ($15 bro).

Then I buy usually a few 'lot's of $500 (being the minimum AS trade size) in growth shares I hold that I think will do well over a few years, when prices look good. No dividend payers to keep it simple.

I then write them up a one pager on the shares and the process to include in a birthday card at the time.

I track all this in XL and make up a P&L for them to show them each birthday, but so they can also do the numbers based on current share prices if they like.

The deal is if they want their cash out at the next milestone, it's theirs. If they want to roll over I will add more shares at the next milestone with final cash out aged 25.

I use both a family trust and an account with parent as trustee for the child.

Family trust as part of the bigger family pie, and minor account for BRK.B, a few low dividend ETFs and a token amount of Disney because it gets the child interested. I drip feed into the minor account monthly to demonstrate the benefits of DCAing over time.

BRK.B is the main investment and was chosen because it has never and is unlikely to ever pay a dividend, I trust Berkshire to beat the market, and it avoids the unearned income tax on minors.