Understanding Investment Bonds

Understanding Investment Bonds
Understanding Investment Bonds - Point B Planning

Understanding investment bonds and helping you save tax

Understanding investment bonds and helping you save tax.

The key takeaway from this blog:

  • 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 similarly 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 are 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 it 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 include. Investment bonds are just another tool in the investment vehicle framework that can assist in long-term financial planning.

**Some things to be wary 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 for 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.

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