You all know my conspiracy theories on retirement Superannuation and how I am getting the best out of my Super despite it's inherent problems, however, I have not chatted to you about Investment Bonds yet.
Investment Bonds have taken a back seat as a legitimate form of investment with the rise of superannuation and folk's love of direct share and property investing. However Investment bonds are now making a comeback since Australian Superannuation laws have continued to change for the worse.
|Slow baked sweet potato.|
What are Investment Bonds?
They are not the low earning cash bonds you can trade on the stock market - these are actually insurance policies that invest directly into a variety of equity (share) investments. Investment bonds combine the features of a managed fund with the benefits of a life insurance policy. Here is an excellent write-up on investment bonds by ASIC HERE.
What are the benefits of Investment Bonds?
Due to these investments being held under the structure of an insurance policy, the following benefits are available to the holder of investment bonds in Australia.
- Investment bonds are tax paid (30% company tax).
- Zero personal tax is payable once you have held the bonds for 10 years
- If you do need to withdraw funds in under 10 years you still get a 30% tax rebate on the taxable portion of the amount withdrawn.
- Investment bonds can be pre-bequeathed outside of an estate.
- Highly tax effective outside of Superannuation.
- Can be accessed at any age or stage of life.
- No need to ever declare the earnings of investment bonds for taxation purposes (unless you withdraw in the first 10 years).
- Can start with as low as $1000 initial investment and then Bpay/EFT/Direct Debit as little as $100 a time for no fee.
- Can swap investments for fee.
- No limits on initial investment amount or subsequent amounts in the first year of investment.
- Can invest 125% of the previous year's investment year on year and still have full tax benefit.
- Tax effective investment for children from the age of 10.
- Tax effective for early retirement before being able to access preserved superannuation
- A variety of investments and funds available including Vanguard and iShares products (depending on the bond provider).
- Fees comparable to Superannuation products (always scrutinise this however)
|A delicious home cooked lamb roast.|
Even the mint jelly is home made.
Here is a link to a couple of high-level articles HERE and HERE to get you started on researching investment bonds.
There are many providers of investment bonds in Australia the largest being Australian Unity . As part of your research, always-always-always read the PDS thoroughly, be fully aware of all fee structures and also be aware of the return and quality of the investment products being offered by each bond provider. Australian Unity's PDS is well written and highly educational - I suggest you start your first PDS research with that one HERE. (No, Australian Unity are not paying me in any way!)
The reason I personally like investment bonds is that I can access these well before I can access my Superannuation and they have slightly better tax benefits than even fully franked dividend shares and after 10 years any of my earnings are tax free including GST (..... pokes tongue out at my Superannuation and makes an immature face). Investment bonds are also infinitely easier to deal with come tax time every year - no tracking of share parcel purchases, dividends, franking credit claims etc etc. Once retired you can organise a regular withdrawal plan for free too - and all tax free after 10 years (..... blows a childish 'rasberry' at Superannuation pension administration fees this time)
Now I am not a financial adviser but I think Australian investment bonds are truly worthwhile your time researching as a highly flexible and tax effective alternative or supplement to Superannuation. Many articles say that investment bonds are good tax havens for the rich (very true) but they are also excellent for low income earners, early retirees, those transitioning to retirement before preservation age and many other personal circumstances too.
Take care folks and stay nice.
Mr HM (Phil)
|Here is a lovely picture of Mrs HM's mum and Toby-the-dog|
a few days before she passed.
Toby lives with us now.