INVESTING INVESTMENT BONDS
- After 10 years, you do not pay any
further tax on the withdrawn earnings.
ADNAN GLINAC
Q
Can the bond be paid to
beneficiaries?
Yes. The owner can nominate beneficiaries
on the bond and the bond therefore does not
form part of the owner’s estate, nor is it dealt
with by their will in the event of death. This
can be an effective way of ensuring funds are
passed in a more timely manner to selected
beneficiaries than they would have been had
they been passed through a will.
DARREN JAMESQ
What are the main pros and cons
of an investment bond?
They have a number of benefits. They can
be a tax-effective, long-term investment,
can provide an effective way to invest for
children, and also can be used as an estate
planning tool.
Generally, bonds have a reasonable levelof investment choice, which gives the
investor access to a number of options to
choose from, to cater to their lifestage.
If you are considering investing in a
bond there are a few things to be aware of,
such as the fact that the tax benefits from
investment bonds are only realised if certain
rules are followed. It’s good to be across
the fees involved for the management and
running of the fund and it’s important to
remember that you have no direct control
over the investments within the bond and
low visibility of the underlying assets that
are being invested in.
DARREN JAMESheld. A key attraction of an investment
bond is that no personal tax is payable
when money is withdrawn from the bond
after 10 years.
ADNAN GLINACQ
When can I access the money?
Money in investment bonds is
accessible at all times but they are designed
to be held for 10 years to generate the
maximum tax benefits for the owner.
However, even if you make a withdrawal
within the first 10 years you can take
advantage of the 30% tax offset to reduce
your personal income tax.
Should an investor need to withdraw
from the bond within 10 years, the
following rules apply:- In the eighth year or earlier, all of the
earnings on the withdrawal are assessable. - In the ninth year, only two-thirds of the
earnings on the withdrawal are assessable. - In the 10th year, only a third of the
earnings on the withdrawal are assessable.
A key attraction is
that no personal tax
is payable when money
is withdrawn after
10 years