Features of investment bonds
The key features of investment bonds are summarised below:
Any person, including parents and grandparents, are now able to provide an endowment for the future financial needs of children and grandchildren. This special feature is called the Centuria LifeGoals Child Plan.
Investors can nominate a child from 0-16 years of age who will become the owner of this investment upon reaching the nominated vesting age, which can range between 10-25 years of age. This innovative plan has no personal tax or CGT obligations for you or the child.
Unlimited contributions in year one
You can make unlimited contributions to an investment option during the first year after you make your first investment, unlike superannuation which has annual contribution cap limits.
In subsequent years, the 125% rule allows you to contribute up to 125% of the previous year’s contribution without resetting the 10-year original investment date for calculating the 10-year period for tax purposes.
Transfer of ownership & named beneficiary
You can transfer ownership of your Centuria LifeGoals investment at any time without tax implications if the transfer is made for no consideration. The original start date is retained for tax purposes.
This process is not as easy within a company structure as tax liabilities may be created.
Tax offset on withdrawals within 10 years
If you make a withdrawal within the first 10 years of your investment, you will normally pay tax on the amount withdrawn but you will receive a 30% tax offset (for the tax already paid by Centuria Life). However, no additional tax may be payable if a withdrawal is made in exceptional circumstances including death, accident, illness or other disability affecting the Life Insured – whether made within or after 10 years.
Regular investment plan
Additional investments into your investment option/s can be automatically debited from your bank account by setting up a regular investment plan.
Regular withdrawal plan
You can elect to withdraw a set amount from your Investment Option each month. After 10 years, and subject to the 125% rule, you will not be taxed on these withdrawals.
Investment bonds may offer protection from creditors in the case of bankruptcy (subject to certain rules), which may not be possible through a company structure.