With housing affordability at an historic low and with the ever increasing costs of education, many would like to explore ways to give their child or grandchild a future financial head start.

While there are many ways this can be achieved, an investment bond can potentially help you fund these future costs tax effectively1.

A smart way to save


  • $50,000 initial contribution
  • Cash account investment pre-tax return of 3.2% p.a.
  • Managed fund and investment bond long term pre-tax return of 9.0% p.a. (5% income, 4% capital growth)
  • Investor marginal tax rate of 47%
  • $1,000 additional deposits per month
  • Investment held for 15 years

Investment returns are for illustrative purposes only and do not represent any actual or future performance expectations.

What is an investment bond & how can it help me save?

An investment bond can be a powerful savings tool. If you’re paying more than 30% tax per annum then investing via an investment bond can be tax effective1. Investment earnings in a bond pay a maximum tax rate of 30%.  By contrast, as an individual once you start to earn income over $45,000 p.a. you begin to pay 32.5.% for every dollar earned and this tax rate will continue to increase as your income grows. This means, within an investment bond structure, savings can compound tax effectively over time.

Because additional taxation benefits are fully realised after a minimum of 10 years, investment bonds have typically been used as a means of saving for a longer-term objective like a child’s future education costs, for example.

Working in a similar way to a Wrap-style investment account, your money can be invested in assets such as cash, shares and / or property – managed by a broad range of professional fund managers.

What are the tax benefits?

  • The maximum tax rate you will pay is 30% however this tax rate can be significantly less than 30% depending on the asset class you invest in due to add backs such as franking credits, making this a potentially attractive savings tool for high income earners. In some cases the effective tax rate has reduced to 12% (Australian equities investment options)
  • There is no need to provide your tax file number or declare any earnings in your personal income tax return (unless a withdrawal is made within the first 10 years) making this an administratively simple investment choice.
  • After 10 years, a withdrawal won’t attract any personal tax which is known as the 10 year advantage. This is often why investment bonds are seen to be a tool to save for future education costs or provide for a child as they become a young adult– if started early. The structure allows additional contribution each year (subject to a limit) without interrupting the 10 year “start date”.
  • Upon death all benefits are paid tax free to recipients regardless if they are dependants, non-dependants or minors.

Control over your investment

  • The primary investor can retain ownership and complete control of the investment bond until it is transferred to the nominated beneficiary.
  • Funds can be accessed at any time and you retain complete control over how your money is invested and how it will be passed on to future beneficiaries.
  • An investment bond can be a non-estate asset, which means that a beneficiary nomination is made and the beneficiary is guaranteed to receive the money you leave behind.

Investment bonds can give access to a broad range of investment managers and strategies, and further fees have become much more competitive over time.

It’s never been a better time to start saving.

As always, the APC team is available to assist you in understanding if this structure is appropriate or beneficial for your objectives and individual circumstances.

  1. If income earned is above $45,000 p.a.