Investment Bonds   Investment bonds represent a tax-effective and simple way to invest in a range of asset classes including, capital guaranteed investments, fixed interest, equities and property, both in Australia and internationally.   Investment bonds provide an attractive investment option in the Australian market for four key reasons: n          Tax effective investing for medium – long term n          Investing for children n          Life Insurance and Estate Planning n          Secure and easy to access   Tax effective investing Being a tax-paid investment, tax is paid by the investment bond manager, meaning the investor does not have to declare the income from their investment for personal or withholding tax assessment, while their funds remain invested.   While investors can access their investment at any time, if the investment is held for 10 years or more, there will be no further tax payable by the investor when withdrawn. If funds are withdrawn before 10 years, some tax may have to be paid on the investment earnings, but this will take into account the tax already paid by the fund.   The investment bond pays tax at a rate of up to 30% p.a. which is lower than some of the personal tax rates in Australia, where the tax-rate can be as high as 46.5% p.a. (including Medicare levy).   Also, by using an investment bond, there are no taxes or duties payable on the transfer of the account to another person, which may apply to other investments.   It is important to note that once your account is open, additional investments into your investment bond will not have to wait 10 years to benefit from the ‘tax-paid’ status, as long as the 125% rule is met. This rule states that as long as your contributions in any one year do not exceed 125% of the previous year’s contributions, the 10 year period begins on the date the account was open. If the 125% limit is exceeded then the 10 year period may be reset.   Investing for children By using an investment bond to fund the cost of education, investors can accumulate their investment without impacting their tax position or that of the child. In Australia, a special tax scale is applied to children, on income from investments, which can be taxed at up to 66%. Investment bonds also incorporate a facility called a Child Advancement Policy whereby the investment bond account (policy) can be transferred to the child automatically at a predetermined age (between 10 – 25), without incurring any taxes or duties on transfer.   Life Insurance and Estate Planning An investment bond can also be used to transfer an investment from one generation to the next, similar to life insurance policies. By nominating a life to be insured and a beneficiary, upon the death of the life insured, the investment will be paid to the beneficiary without any taxes that would otherwise apply to other types of investments.   Secure and Easy to access Investment bonds are regulated by government bodies such as Australian Securities & Investments Commission (ASIC) as well as Australian Prudential Regulation Authority (APRA), providing security to the interests of investors. In addition, some of companies offering investment bonds, like the IOOF Group have been in existence for over 160 years providing a long history of funds management expertise.   Most investment bonds allow investments to start with as low as $2,000 and include facilities such as online access and automated regular savings and withdrawal plans.   Information Supplied by: IOOF Phone: +61 3 8614 4820 Website: www.ioof.com.au