Investment Bonds Explained (for Australians)
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- Опубликовано: 8 июл 2024
- Investment bonds (also known as insurance bonds) can be a handy tool to keep in your toolbox when it comes to building and managing your wealth, offering some pretty unique benefits from a tax, asset protection and estate planning perspective.
Unfortunately, investment bonds aren’t very well understood by most people - let’s fix this!
Today I want to cover off the key information you need to know when considering an investment bond. They have some pretty unique features which means they won’t be the right fit for everyone, but they can be very beneficial in the right circumstances.
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#investgrowrest #investmentbonds #insurancebonds
Very interesting video, thanks. At 5:54 a typo "disocunt" 🤭
Really well explained! Definitely something a lot of people either don't know exists, or they think it is too complex.
Thanks mate! I guess it's a little bit like a bucket company
Very clear and helpful video, thanks.
Great clear educational presentation. Thanks
I didn't learn the information I was looking for, but the information in this video was interesting and something I didn't know was available, so it was still really useful to me. Thanks 👍🏼
I work as a trainer in Super and Investments, and was looking for a great way to explain investment bonds. This is fantastic. Thank you!
Thats awesome, glad it helped 😊
Insurance/investment bonds get such a bad wrap from some prominent Aussie finfluencers sadly. This video sets the record straight (thank you).
We love them and they suit our needs perfectly.
We purposely break the 125% rule so we get the benefit of the 30% tax credit once our income drops below the 30% marginal tax rate. Additionally we can organise for monthly auto withdrawals too once we are in drawdown.
I suggest reading the PDS carefully re the fees. I’ve found using simple vanilla index funds as the underlying investment (Ishares/Vanguard) to be the cheapest.
Hey Phil, you're dead right, they do get a lot of unfair negativity. I find a lot of the bad press is because the fees are a little higher than say an index ETF through an online broker account but this overlooks some of the key benefits that come with the slightly higher price tag.
Thats interesting what you say about the tax credit when your MTR drops, never really thought of it this way. It's almost like you are prepaying some tax to get it back later - I like it!
Explain more this over 125%
Investment bonds returns are taxed at company tax rate (30%), after 10 yrs given the 125% rule is met returns will no longer be taxed. My questions are: 1) do the taxed returns in the bond include both the income and growth components or is the growth component not taxed until you sell (2) after the 10 yrs is up, given you met the 125% rule in that time, do you need to still add funds to be entitled to the tax free environment (3) after the 10 yrs is up and you enter the tax free environment, are both withdrawals and investment returns tax free?
really good explication,Brad 👍🏽
Thanks mate, appreciate it 👍
Might be a dumb question but whatever. When I make an investment into an investment bond and hold it for 11 years, I will pay tax on the gains of the investment in the form of capital gains tax but not as part of my income tax? But if I were to take it out after 7 I would pay tax on those gains twice in the form of capital gains tax AND additional income tax?
Whereas superannuation has the benefit of not paying additional income tax and a 50% CGT discount?
Seems that superannuation is much more tax effective, I suppose the only limiting factor is the cap on voluntary contributions, correct?
Definitely not a dumb question! You don't pay tax twice on investment bonds as if you were to withdraw prior to the 10 year period you get a credit for the tax that was paid within the bond. Think of it like a franking credit.
Super is definately more tax effective but also comes with more restrictions. Just bear in mind the CGT discount with super is only one third not 50%. But there are was you can also mitigate all CGT in super
@@GuidedInvestor I think I understand it a bit better now. Are taxes paid on investment paid at the time of purchase only or is it yearly? Does this apply to all investments? Cheers for the answers I'm still trying to cover my basics.
It would be nice to see how much of a tax saving these investment bonds are actually saving investors. For example, you have Generation life. 3 options being Advantage, Enhanced & Optimised. Even with these 3 options claiming to be tax effective, we don't really know the effectiveness of it.
Say you have an investment bond tracking the A200 index which pays out a reasonably high dividend. Would these dividends also be taxed and re-invested at a lower rate? We don't actually know the savings.
I do have investment bonds myself which were recommended from my financial advisor at the time. They have performed quite well.
But I do have heaps of questions and unfortunately there isn't a lot of information about this subject.
When investing for the long-term it's still unclear whether investment bonds tracking a particular index outperform an ETF tracking the same index after management fees and taxes.
Any further information would be appreciated.
Hey Hayden, sorry for the late reply mate, I missed this one.
I actually caught up with the BDM from generation life before Christmas and they had figures on the performance of index funds inside the bond vs outside the bond. Obviously they are the same investment, but the return was higher inside the bond due to the way they hand the tax treatment.
They essentially harvest capital losses when they can to offset gains (and last year was a great year to do that).
If I can find the figures back again I'll let you know and email them through
@@GuidedInvestor That's reassuring to hear. I'd love to see the figures if you get a hold of them.
Thanks mate
@hayden3678 hey Hayden, I got those figures. Flick me your email if you want a copy
@@GuidedInvestor Hey mate.
I can't type in my email without it getting deleted in the comment section. Is there any way you can contact me?
@@hayden3678 maybe just DM me on instagram?