Investment bonds an alternative to super
Financial advisers looking for tax-effective savings options other than superannuation in light of the Federal Budget changes can explore investment bonds, Lifeplan said.
The funds management firm suggested that investment bonds were a particularly good tax-advantaged alternative to superannuation, with earnings tax paid at a maximum of 30 per cent.
Head of Lifeplan, Matt Walsh said changes to the super system meant many investors would have to think of alternatives sooner than they thought but said they should not panic.
"A well-trodden path for higher net worth and higher income investors in the past who had capped out their superannuation limits is investment bonds, but these aren't the exclusive domain of the very wealthy — they are easily accessible to everyone," Walsh said.
Investment bonds also did not have restrictions on withdrawals before preservation age, and withdrawals would be non-assessable for income tax purposes and there was no preservation age or condition of release once the policy was 10 years old.
"In effect, it creates a true transition to retirement strategy outside of superannuation. In this situation an investment bond can be drawn on with a ‘deductible amount' plus a tax offset in accordance with the individual's marginal tax rate," Walsh said.
AUTHOR
Malavika Santhebennur
Recommended for you
Sequoia Financial Group has declined by five financial advisers in the past week, four of whom have opened up a new AFSL, according to Wealth Data.
Insignia Financial chief executive Scott Hartley has detailed whether the firm will be selecting an exclusive bidder for the second phase of due diligence as it awaits revised bids from three private equity players.
Insignia Financial has reported a statutory net loss after tax of $17 million in its first half results, although the firm has noted cost optimisation means this is an improvement from a $50 million loss last year.
With alternative funds being described as “impossible” for fund managers to target towards advisers without the support of BDMs for education, Money Management explores the evolving nature of the distribution role.
