Investment bonds: simplifying family trusts

Investment bonds have a range of taxation benefits and features that provide an efficient and cost effective alternative for long term wealth creation, estate planning and intergenerational wealth transfer. Investment bond investors will generally have no personal taxation or capital gains tax reporting or liabilities.

A discretionary or family trust can reduce or even eliminate the level of its distributable income if invested in one or multiple investment bonds. This strategy may assist discretionary or family trusts that have assets that generate excess distributable income.

No annual income for the trust to distribute

Unlike other investments such as shares, managed funds and term deposits, Investment Bonds do not distribute ‘taxable income’ to investors unless a withdrawal is made within the first 10 years.  Whilst the trust remains invested in Investment Bonds there is no annual income for the trust to distribute.

No need for a corporate beneficiary

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This strategy also eliminates the need for a corporate beneficiary to be used. It also means that punitive levels of tax on undistributed income for the trust do not apply on earnings from the investment bond, while the higher tax rates that apply to minor beneficiaries also do not come into play as there is no distributable income from the investment bond if held for at least 10 years.

Tax free benefits on the death of the life insured

On the death of the life insured under the terms of the investment bond, the proceeds at any time can be distributed tax free to the remaining beneficiaries in accordance with the trust’s rules.

How do investment bonds compare to other investments?

Unlike other investments such as shares, managed funds and term deposits, investment bonds offer a tax effective, simplified approach with no requirements to distribute taxable income, or capital gains to investors unless a withdrawal is made within the first 10 years.

Switching between investment options within an investment bond also does not attract any capital gains tax, as any gains (or losses) are contained within the investment bond structure.

The ability to arbitrage tax, protect assets from creditors, and help with succession planning, makes Investment Bonds owned by a discretionary or family trust as useful as ever in wealth creation.

How can Generation Life help?

Generation Life is an Australian leader in investment bonds. With a choice of 37 investment options and the #1 provider for net funds flows for the last 4 years¹, Generation Life’s LifeBuilder is a tax effective, highly accessible investment solution for intergenerational wealth transfer.

Get more information

To find out more about Generation Life and other uses of investment bonds, visit www.genlife.com.au
 

Or call one of our distribution team members in your area:

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1. Source: Strategic Insight Actuaries & Researchers - Dec 2017

Disclaimer: Generation Life Limited AFSL 225408 ABN 68 092 843 902 is the issuer of investment bonds (IB).  The Product Disclosure Statement should be considered in deciding to acquire or to hold an IB. This information has been prepared without taking into account the objectives, financial situation or needs of any individual.

Catherine van der Veen & Lucy Foster
Joint Chief Executive Officer
Generation Life

With a combined 30 years’ experience in executive roles in financial services, Catherine and Lucy are leading the design of financial solutions for different generations of Australians.