Section 7(3) and Interest Earned on Investments in the Name of a Minor Child
📌 Question
My client, a sole proprietor, invested money into an account in his daughter’s name (she’s under 18). The interest was reported on her tax return, and SARS has issued an assessment in her name. Should the interest be declared under the father's return instead?
✅ Response
According to section 7(3) of the Income Tax Act, any income (like interest) from assets given by a parent to a minor child must be taxed in the parent's hands not the child’s. That means the parent, not the minor, must include that income in their tax return, regardless of whose name the assets or IT3(b) is issued in.
📎 What to do next
Lodge an objection on the child’s return and correct the record so the income appears on the father's tax return. Even though the IT3(b) is issued in the child's name, SARS may raise the assessment based on that, which is why fixing it is important.
⚠️ Note that there can be exceptions or agreements between SARS and financial institutions, so reviewing the investment paperwork is always a good idea. To understand SARS’s approach fully, review the investment policy documents. There may be details influencing the tax treatment.
