Considering an investment bond for your child or grandchildren is about more than just money. It’s ensuring security, stability and success for the future of the ones you love most. And above all, it’s creating a bond for life.
What is an investment bond?
A flexible investment fund, which is tax-effective, provides investment choice and allows for long-term saving. They’re pretty simple products really, just like a regular savings plan and you don’t have to be rich to have one.
If you or your partner are earning $37,000 or more per year (or think you might in the future) then you could consider setting up an investment bond which will pay less tax than you do. Also if you’re thinking about how to pass on your inheritance to the next generation for a specific reason (now or in the future) and at a specific time with certainty, this could be for you.
So, an investment bond is simply an account where you invest for the long term (ten years or more) for tax advantages, and also where you compound your savings (like superannuation). You have the choice of a range of diversified investment options including shares, property and cash.
Your investment bond is designed to be held for at least 10 years to be most tax effective and offers the continued flexibility to make additional contributions over the life of the investment bond.
While there is no limit on how much you can contribute in your first year, each year following, you can continue to add up to 125% of the previous year’s contributions, without extending your 10 year term for tax purposes. This means, the contributions you make along the way also receive full tax benefits.
It’s your money so it’s important to know you can access it at any time.
However, it’s worth remembering that if you do withdraw part or all of your investment before the 10 years is up, some of the earnings may be taxable, depending on when the withdrawal is made (although you will get a tax offset back).
If you don’t make a contribution to your investment bond for one year, any new contribution in the following years resets the 10 year period.
Investment bonds are tax paid investments, meaning that when earnings are received we pay tax at a rate of up to 30%. If your marginal tax rate is higher than 30%, this makes investment bonds a great tax effective long term investment.
If you invest in the bond for at least 10 years, your growth on the entire investment, including additional contributions, will be tax paid, and withdrawals after the 10th anniversary will be free of any personal tax in your hands - subject to the rules around the 125% opportunity. Also, you will not attract any capital gains tax on withdrawal or when switching between investment options.
No personal tax payable when investment held for 10-year period if no withdrawals made
No personal tax payable on bond earnings
Investment earnings are taxed at a maximum rate of 30%
Minimum investment amount of $1,000
Can invest a single amount or can choose to add to your initial investment each year
37 investment options to choose from and the ability to switch without personal tax consequences
Complete flexibility to access your investment at any time
Automatic portfolio rebalancing
LifeBuilder’s Future Event feature - control how and when your funds are passed on
Regular savings plan with the ability to automatically increase annually
Minimal to no tax reporting provided there are no withdrawals within the 10 year period
Transfer your investment without restarting the 10 year period, preserving its tax paid status
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