You’ve worked hard for your money, why keep it locked up in superannuation? It’s natural to want freedom and flexibility in accessing what’s rightfully yours.
Like superannuation, an investment bond has favourable tax treatment. However, it comes with less stringent rules around when and how you can access your money.
In the first year, there’s no limit to how much you can put into the bond. This means investors can start with a significant sum, no matter your age.
Tax is paid within the fund (at 30%), which means it does not count towards your annual income or get declared in your tax return. The standard term is 10 years, but you can access your money before that if you need to (forfeiting tax benefits) or leave it in for up to 40 years.
As Andrew heads towards retirement age, he seeks a way to keep growing his wealth with the intent to create an income when he stops work. An investment bond is a long-term play for him.
Up until now, Andrew has focused on superannuation, meeting his contribution limits each year. However, he’s reluctant to continue adding all his extra cash to the fund.
What if he needs his money? What if he loses his job? What if his circumstances change? Or there’s an unexpected expense? He wants to explore other options where he can get to his money quickly if needed.
Andrew is keen to explore tax benefits. And fair enough: “I’ve paid my tax on the way in, why do I need to pay tax when I take my money out?”
An investment bond is a good strategy for Andrew because it can work alongside his superannuation without restricting access to cash if—or when—he needs it.
Some of the beneficial features of an investment bond that support this strategy include: