Bonds could provide tax relief for high income earners
High income earners could sidestep the Federal Government's 2 per cent Temporary Budget Repair Levy by investing outside of their superannuation fund in investment bonds.
Following the announcement of the new levy, head of technical services at IOOF, Damian Hearn, said investment bonds — taxed at the company tax rate — would provide those earning more than $180,000 a year, an opportunity to make a taxation saving of 20.5 per cent, compared with an investment portfolio.
"For a high income earner — earning over $180,000 — by the time the Medicare levy goes up [to 2 per cent] and we also see this temporary budget relief levy comes in we're basically on the top marginal rate of 45 per cent, we actually see our top marginal tax rate in Australia rising to 49 cents in the dollar," he said.
"We're seeing a lot of focus on our investment bond, especially since the Government reduced the contribution caps for super... so a lot of people have looked for an alternative outside super."
Hearn said investing in investment bonds would enable clients to take advantage of the proposed cut in the company tax rate — from 30 per cent to 28.5 per cent — while limiting their exposure to the top marginal rate.
Recommended for you
Ten Cap has announced it will launch its first active ETF on the ASX later this month, expanding retail access to its flagship Australian equities strategy.
Flows into cash and fixed income ETFs rose by 46 per cent in October with investors particularly demonstrating a preference for Australian credit ETFs as they move away from AT1 bank hybrids.
Having identified Australia as a growth market, J.P. Morgan Asset Management has collaborated with Betashares to offer two multi-asset managed portfolios on its Direct platform, the first funds on the platform from an external manager.
First Sentier has announced it will transition the Stewart Investors investment management responsibilities to its affiliate investment team in light of three senior portfolio manager exits.
