May this alternative investment structure be suitable for you?

Most of us are well versed in the two more common forms of investment. That being personally (in our name) or our superannuation (held in a trust structure). But there are other ways of structuring our portfolio. 

Some we have never discussed in our articles like setting up a company and some we have touched on, like investment bonds. In this article want to further explore an investment bond. Not so much about the mechanics of the structure, as you can read about it here, but to whom it may be useful and how. 

Quick run down – What is it 

  • Investment Bonds (Also known as Insurance Bonds) are tax paid investments. Internally taxed at 30%
  • The capital growth of the investment is not included in your taxable income if you held the investment for more that 10 years. (<10years may result in some or all capital growth to be included, possibly reduced by 30% offset)
  • Underlying investments, like an investment platform can be across different asset classes and risk profiles. 

Who Would Benefit from it?

Saving for a long term goal

The Investment Bond encourages long term savings. Its full benefit is realised after the investment is held for more than 10 years. So it would suit those with long term goals. This may be savings for children’s education or leaving an inheritance. 

Paying a high marginal rate of tax

The earnings of an investment bond is taxed internally at a maximum rate of 30%.  The annual returns are not assessed in your personal tax. For anyone who is paying tax at a higher rate, there is an opportunity to save on tax. 

Supplement Super

Super is the most tax advantageous environment, being taxed at 15%. However unlike super, investment bonds have limitations that restrict access to your funds should you need them.  Yes, there is a trade-off for early access, but not a restriction. 

So an investment bond can be used as an alternative or in conjunction with superannuation. Still providing some tax advantages for those on higher income, but providing more flexibility than super.

Estate Planning 

Investment bonds allow you to nominate a beneficiary to receive the proceeds on your death, without it forming a part of your estate.  They are regulated as a life insurance investment policy so the proceeds are a non-estate asset. An Investment Bond within your estate plan can provide certainty as to who will receive the proceeds.   

Your Will can be contested and your superannuation beneficiaries are governed by legislation. An Investment Bond has no restriction who you can nominate to receive proceeds on your death.  Therefore it can be used to:

  • Make donations to charities, schools or organisations.
  • Leave money to non-related parties.
  • Make your estate more equitable by directing proceeds to certain beneficiaries that may not be handled in your Will. 

An investment bond will not be for everyone. There are complexities that need to be assessed against your goals, situation and objectives. Schedule a No-Obligation meeting with us at Discovery Wealth Advisers to see if an Investment Bond could be suitable for you.  

Disclaimer

Authorised Representative of RI Advice Group Pty Ltd ABN 23 001 774 125 AFSL 238429. The information provided in this document, including any tax information, is general information only and does not constitute personal advice. It has been prepared without taking into account any of your individual objectives, financial situation or needs. Before acting on this information you should consider its appropriateness, having regard to your own objectives, financial situation and needs. You should read the relevant Product Disclosure Statements and seek personal advice from a qualified financial adviser.

Discovery Wealth Advisers

Author Discovery Wealth Advisers

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