Investment Bonds. An effective way to invest. Grow. Nurture. Horizon

Transcription

1 Investment Bonds An effective way to invest Grow Nurture Horizon

2 Investment bonds represent an opportunity to build wealth in a unique tax environment *. Here is a brief explanation of how investment bonds work. What is an investment bond? An investment bond is a structure for investing, as is a superannuation fund or a unit trust. However, each structure has its own set of rules, with differing advantages and disadvantages. Why invest in an investment bond? If you are a suitable investor, there are a number of compelling reasons to consider investing in an investment bond: 1. Tax paid investing Investment bonds are tax paid investments, with income and capital gains taxed at a maximum rate of 30% within the bond. The 10 year rule ten years after the commencement of an investment, all proceeds will generally be available without any additional taxation liability, provided each year s contribution does not exceed 125% of the previous year s total contributions. 1 * The tax effectiveness is dependent on the personal circumstances of the individual investor. Investors should seek their own independent taxation advice.

3 2. Non-tax related benefits Unlike superannuation investments, investment bonds are not subject to preservation. This means that your savings can be accessed before you reach age 55, which is ideal if you are looking to fund an early retirement. Investment bonds give you the freedom to nominate anyone as a beneficiary in the event of your death. You are not limited to dependants, as is required for superannuation investments. If you are investing for a child, you can avoid the punitive taxation rates of up to 45% which are placed on the investment income on the assets of minors. Tax is paid at a maximum rate of 30%. 3. Simplicity When you invest in an investment bond, you will not need to include investment earnings in your annual tax return (unless you make a withdrawal within the 10 year period). Why might an investment structure with a maximum tax rate of 30% be attractive to investors? Investment bonds are particularly attractive to investors who pay higher personal marginal tax rates. For example, where an investment does not qualify for the CGT discount, the maximum tax rate of 46.5% may apply on their investment earnings, compared to a maximum rate of 30% for an investment bond. In addition, unlike managed funds where a switch of investment options or change in ownership of the units could result in a personal CGT liability to the investor, switching between investment funds within an investment bond does not result in a personal CGT liability, nor does it reset the commencement date for 10 year tax rule purposes. In this instance, the CGT liability resides in the investment fund and is reflected in the unit price. In most circumstances a change in ownership of the bond will not result a CGT liability. Please note that stamp duty may need to be paid prior to any change of ownership before we acknowledge the change. 2

4 Does this mean that an investment bond may not suit lower marginal rate taxpayers? Yes. If your marginal rate of tax is less than 46.5% (includes Medicare levy) and you invest in an investment bond, you may find you pay more tax than in other investment structures. The higher your tax rate, the more attractive an investment bond potentially becomes compared to other structures. However, you should consider the non-tax related benefits of investment bonds. What is the 10 year rule in more detail? The 10 year rule is not a minimum investment period you can invest for a shorter or longer period. From ten years, subject to not restarting this period, your investment is entirely tax paid. That is, all investment earnings are available without additional tax. You are able to contribute up to 125% of your previous year s contributions without restarting the 10 year rule. This allows for significant increases in contributed amounts. How do I restart the 10 year rule? You will restart the 10 year rule if you contribute more than 125% of your contributions in the previous policy year. 3

5 At what rate am I taxed if I make a withdrawal before the ten year period has expired? That depends on when you make the withdrawal. See the table below: 8 years or less 100% of earnings assessed at individual s marginal tax rate (MTR) less a tax offset of 30% In the 9th year In the 10th year After 10 years 67% of earnings assessed at individual s MTR less a tax offset of 30% 33% of earnings assessed at individual s MTR less a tax offset of 30% No additional tax Does ING have an investment bond offering? Yes. ING offers the Tax Effective Investment Bond a tax paid investment that provides a simple and flexible way to save for a future goal. The Tax Effective Investment Bond will provide a selection of 15 investment options across different risk profiles. 4

6 How much do I need to invest? You can invest in the Tax Effective Investment Bond from as little as $2,500. What fees do I pay if I choose to invest in the Tax Effective Investment Bond? The fees you pay are dependent on the investment options you choose, how much you agree to pay to your adviser, plus the fee option you select. Entry, exit and ongoing fees are shown below: Entry Fee option % Nil Entry Fee option % Entry Fee 0 4% 0% Exit Fee 0% Up to 3% of any amount withdrawn within 3 years Ongoing Fees 1.30% (p.a.) to 2.11% (p.a.) depending on the fund An Annual Fee of $20 p.a. applies to total account balances under $10,000. Fees applicable from 15 October % (p.a.) to 2.66% (p.a.) depending on the fund 5

7 >> For more information on ING s Tax Effective Investment Bond, speak to your financial adviser today or visit for the latest Product Disclosure Statement. 6

8 Customer Services Phone Postal address ING Life Limited GPO Box 5306 Sydney NSW 2001 Website ING Life Limited ABN AFSL Kent Street Sydney NSW 2000 This material is current as at September 2007 but may be subject to change and no part of it may be reproduced without prior written permission. This material has been prepared without taking into account a potential investor's objectives, financial situation or needs. Before making a decision based on this material, a potential investor should consider its appropriateness, having regard to their objectives, financial situation and needs. ING s Tax Effective Investment Bond is issued by ING Life Limited ABN AFSL Before acquiring a product or deciding whether to continue to hold a product, investors should consider the Product Disclosure Statement which is available at An investment in the product is not a deposit or a liability of ING Australia Limited, ING Bank (Australia) Limited or any other company in the ING Group other than ING Life Limited. Past performance is not an indication of future performance. L2530/0807