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Centuria launches Investment Bond Calculator

Centuria Capital Limited’s investment bond business, Centuria Life, launched its bespoke investment bond calculator after more than 12 months of development and testing.

The calculator, known as LifeGoals Investment Forecaster Tool (LIFT), follows the launch of the Centuria LifeGoals investment bond products in March 2019.

It is one of the most sophisticated investment bonds calculators available in Australia as it incorporates metrics such as franking levels, stock turnover, the percentage of income versus growth, and the different treatment of capital gains.

LIFT calculates returns after tax and fees and provides a detailed output summary. It also enables investors and advisers to model an income stream after 10 years.

John McBain, Joint CEO of Centuria, said, “Centuria is well-known throughout the property industry for both our listed and unlisted real estate funds yet we also have a 40-year history in investment bonds.

“Investment bonds are a flexible wealth generation vehicle. They provide individual investors with competitive after-tax returns, can be a complement to superannuation, and enable effective estate planning strategies.

“This calculator is our way of simplifying the concept of investment bonds to help illustrate the long-term benefits and opportunities for individual investors and their advisers.”

LIFT is available for individual investors as well as financial advisers, with two tailored versions available for the respective user types.

Michael Blake, Head of Centuria Life, said, “Our core aim is to give investors and financial planners access to who we believe are some of Australia’s best fund managers, in a maximum 30% tax paid structure. Modern investment bond products, such as Centuria LifeGoals, offer a menu of high-quality investment options across multiple asset classes including low-cost index options.”

LIFT enables the user to input their marginal tax rate, select any single asset class or a combination of asset classes, and project the investment over any time period. LIFT then provides after-tax return forecasts.

Financial advisers can access a calculator that directly compares the after tax and fees returns of managed funds versus investing in investment bond options.

Centuria LifeGoals provides 22 investment options, across a range of asset classes including: property and infrastructure funds; cash and fixed-term interest funds; diversified balanced funds; international share funds; diversified growth funds; and Australian share funds. All funds are managed by fund managers external to Centuria.

Tax incentives

The Centuria LifeGoals investment bonds are a tax paid investment much like superannuation and the investor does not pay any personal income tax on the fund earnings. Instead, the fund pays tax at an annual rate of 30%, less allowable tax deductions. This rate is considerably lower than the highest individual tax rate margin of 47%.

Unlike superannuation, Centuria LifeGoals funds are accessible at any time and are transferrable with no capital gains tax payable, if the transfer is made for no consideration.

Mr Blake explained, “If an investor makes withdrawals in the first 10 years, the earnings are taxable, but the investor receives a 30% tax offset. However, if the investor holds the investment for more than 10 years, withdrawals are considered tax-paid and the investor does not pay any personal tax.

“Unlike superannuation there are no limitations on the fund balance and investors can contribute up to 125% of the previous year’s investment without re-starting the 10-year tax benefits. Investment bonds are a great complement to superannuation as a long-term investment vehicle.”

Estate Planning

Centuria LifeGoals also offers more certainty in estate planning than the traditional approach of only using a will.

The investment bond products are offered under a life insurance structure, meaning an investor can nominate single or multiple beneficiaries who will receive the funds in the event of the investor passing away. These funds are paid directly to the nominated beneficiaries, in the percentages nominated by the investor, outside of his/her will and do not form part of the estate.

Centuria Life currently manages $0.9 billion in assets under management1. It is the fourth largest Australian investment bond issuer. Staff are based in Sydney, Melbourne and Brisbane.

Visit the LIFT calculator.

1 Based on Centuria Capital Group Half-Year Financial Report, 31 December 2019