Point B Planning white logo
Loading...

Understanding investment bonds and helping you save tax

Understanding investment bonds and helping you save tax ** **Key takeaways:

  • Earnings are taxed at a rate of 30%
  • Investments are tax free after 10 years
  • No need to report or include in your personal tax return

Investment bonds are a combination of investments, super and life insurance products. Generally speaking, the investment bond could be utilised similar to another form of savings that works alongside superannuation and long term investments with the ability to invest in the share, bond and cash markets.

Investment bonds are taxed within the fund, still enjoy franking credits and is taxed at a company rate of 30%. There is a bit more flexibility with no restrictions on contribution caps and less legislative changes. Other benefits include no capital gains tax on switches, no need to report your TFN or include in your personal tax return and lastly capital gains tax is eliminated after 10 years.

Additionally ownership can be transferred tax free where other investments may incl. Investment bonds are just another tool in the investment vehicle framework that can assist in long term financial planning.

**Some things to be weary of: **

  • There are no CGT discounts within the fund so this may reduce the overall return.
  • Contributions exceeding certain limits may disqualify or reduce the benefits of the 10 year rule.
  • Generally speaking, these investments may be suitable to mid to long term investment objectives with medium to high marginal tax rates.

As per usual, please consult our financial planner to ensure you are receiving tailored advice that is suitable to your personal needs. Any information provided in this article is general in nature and is not provided to influence the readers decisions.

Nov 16, 2020 Investing
Follow Us
Visit my profile on Adviser Ratings
Important Information

PointB Planning Pty Ltd ABN 46 386 865 719

PointB Planning Pty Ltd is a Corporate Authorised Representative No. 1261646 of InterPrac Financial

Planning Pty Ltd AFSL License No. 246638

Contact us

Yarraville Office

1/260 Whitehall Street Yarraville VIC 3013

Ph: 03 9044 1950

Bundoora Office

Level 1, Suite 103, 12 Ormond Boulevard Bundoora VIC 3083

Ph: 03 9044 1950

Copyright 2018 PointB Planning Pty Ltd. All Rights Reserved.