Looking beyond super for tax effective investment structures

30 June 2016

With proposed changes to superannuation announced in the 2016 Federal Budget, many investors are seeking advice on their retirement planning options.

Company Structures and Investment Bonds are two investment structures worth considering as a means of supplementing superannuation.

Let’s take a look at them side by side.

Company structures may suit high net wealth clients who are happy to set up a private company to hold investments. But this may only be a tax deferral mechanism, as eventually funds may need to be paid out of the company and personal tax be payable at the investor’s marginal tax rate, less any franking credits.

Company structures also have other limitations:

  • Capital gains tax reporting or compliance is required.
  • The company structure offers little protection from creditors following a bankruptcy event.
  • Estate duties may be payable if the investor dies, at a loss to the surviving beneficiaries

Investment Bonds may be a more appropriate longer-term strategy given that personal tax obligations no longer apply after 10 years.

Investment Bonds can be a simple and flexible alternative to investing via company structure.

  • No personal income tax on your investment during its term, unless a withdrawal (or part-withdrawal) is made before 10 years.
  • No declaration of growth or income is required on your income tax return
  • No tax on any withdrawals (whether made before or after 10 years) if due to death, disability or serious illness of the Life Insured or unforeseen financial difficulties of the investor
  • Both the investment and its proceeds would only be payable to Bond beneficiarie if the Investor were also the Life Insured (the normal scenario when Bond beneficiaries can be nominated) and if the Investor (and, therefore, also the Life Insured) dies.
  • No tax on proceeds paid directly to beneficiaries.
  • For more information on how investment bonds compare to investing via a company structure, download the strategy.

Read about the advantages of investment bonds here. Alternatively, contact our business development team for more information.