Supplementing super

An Investment Bond may help you supplement your retirement savings

It’s no secret that Australia’s population is ageing, and at the same time, you’re likely to live a longer life than past generations thanks to advancements in healthcare and a higher standard of living. This is great news – the opportunity to retire and have another 25 years or so of living ahead of you.

But…do you have sufficient retirement savings to see you through? While superannuation is arguably one of the most important investments you can make, recent changes to the superannuation system have far-reaching strategy implications for many. As a result, it’s important to consider tax effective strategies outside of superannuation that can be used to bolster your retirement savings.

From 1 July 2017, major changes to superannuation came into effect. These changes include:

  • restrictions to the amounts that can be contributed into superannuation, both as concessional and non-concessional contributions
  • a $1.6 million superannuation transfer balance cap on the total amount of superannuation an individual can transfer into pension phase
  • the removal of the tax exemption for transition-to-retirement.

The current tax position of an investment bond is not subject to any proposed change, other than a favourable tax rate reduction (from its current rate of 30%) in the future.

The limitations of super

Superannuation can be a tax effective way to save for retirement. The maximum tax payable on superannuation is 15%; low when compared to the highest personal marginal tax rate of 47% (including the Medicare levy).

However, there are limits and constraints with super, and you may need complementary investments to supplement it as part of your overall retirement investment strategy.

Limited contributions

To contribute to superannuation, you must meet eligibility rules. Individuals under the age of 75 are permitted to claim a tax deduction for personal super contributions. If eligible, contribution caps will limit the amount you can contribute to your super fund.

Contributions from an employer, including amounts paid under a salary sacrifice agreement, and contributions for which a personal tax deduction is claimed cannot exceed $25,000 in a financial year.

Personal after-tax contributions are not taxed on amounts up to the non-concessional (personal after-tax) contributions cap, which is $100,000 in a financial year.

Under age 65, you may be able to combine the limits for three years to contribute up to $300,000 in a single year. This is subject to the new transfer balance cap of $1.6 million.

Superannuation receives tax concessions, but in exchange, access to money is restricted until a ‘condition of release’ is met. This generally means that you cannot access your superannuation until you reach ‘preservation age’ and have retired.

Access restrictions

If you were born before 1 July 1960, your preservation age is 55; it increases to age 60 for those born after this date. In some cases, such as permanent disability, earlier access may be allowed.

An alternative tax effective structure such as an investment bond can be used to supplement superannuation and provide you access to your savings at a time of your choosing.

How can investment bonds supplement super?

An investment bond is a tax effective structure. Like superannuation, tax is paid within the investment bond rather than personally by the investor. The maximum tax paid on the earnings and capital gains within an investment bond is 30%, although franking credits and tax deductions can reduce this effective tax rate. This makes them an attractive investment option for high income earners.

A key feature of investment bonds is that if you hold the investment for 10 years, regardless of the amount investment, you pay no personal tax. None. If the investment is redeemed within the first 10 years, you will pay tax on the assessable portion of growth…on the upside, your savings are always available to you.

There are clear benefits of using investment bonds to supplement superannuation:

Contributions are not limited

There is no limit on the amount you can invest to establish an investment bond. In addition, you can make subsequent investments up to maximum of 125% of the previous year’s contribution without restarting the ten-year period. You can choose to start a new investment bond if higher amounts are to be subsequently invested.

Access restrictions

Unlike superannuation investments, investment bonds are not subject to preservation, so you can access your savings before age 55. This is ideal if you are looking to fund an early retirement.


Investment bonds provide you with freedom to nominate anyone as a beneficiary in the event of your death. Beneficiaries are not limited to ‘dependants’, as is typically required for superannuation investments.

Investment bonds provide a tax effective means of investing and a whole lot more flexibility.

If you would like more information about supplementing your superannuation,  call 1300 50 50 50

Centuria’s Investment Bonds offer a tax effective investment vehicle outside of superannuation. They have features that investors should consider if they wish to invest outside of superannuation. Suitability of an investment in a Centuria Investment Bond will depend on a person’s circumstances, financial objectives and needs, none of which have been taken into consideration in this advertisement. Prospective investors should obtain and read a copy of the Product Disclosure Statement (PDS) and consider the information in the PDS in light of their circumstances, objectives and needs before making a decision to invest. We recommend that prospective investors consult with their financial adviser. This document is not an offer to invest in any of Centuria’s Investment Bonds. Investment in Centuria’s Investment Bonds are subject to risk as detailed in the PDS. Centuria will receive fees in relation to an investment in its Investment Bonds. Issued by Centuria Life Limited ABN 79 087 649 054 AFSL 230867.