Demand for tax-effective investment drives product innovation

Neil Rogan

Neil Rogan

Tax-effective investing outside of super just got better, with the creation of three new investment bond funds by investment bond specialist, Centuria Life Limited (Centuria).

Describing the new funds, Neil Rogan, General Manager of Centuria Life, the Investment Bond Division of Centuria, said the new investment options have been developed in response to demand from advisers looking to offer their clients a larger and more flexible range of investment bond funds.

“Investors seeking medium to long-term investment options outside of super have gravitated towards investment bonds, because they are so tax-effective, yet flexible. Investors can make additional contributions to their investment each year, and if they hold the bond for 10 years or more, they pay no personal income tax on their investment returns.

“At the same time, if for some reason they need to withdraw their investment before 10 years, they can, which gives great peace of mind.

“Advisers are telling us that clients are interested in the investment bond structure for a number of reasons. High net worth clients may have reached their superannuation cap and want other tax-effective investment options, but equally, parents or grandparents saving for a child’s education can also see the benefits.” Mr Rogan explained.

The new investment bond funds take Centuria’s offering to seven, with each of the newly created funds employing different investment strategies.

Cash Plus Bond is a low risk, low fee fund which invests in Australian and international fixed interest portfolios with the aim of providing a return of 0.5% above the cash rate.

Property Bond is a medium risk, low fee fund which invests primarily in Australian and international property, both directly and through listed entities.

Imputation Bond is a higher risk, low fee fund, which invests primarily in Australian shares, in particular those which pay franked dividends. The aim is to achieve an internal tax rate comparable with an investment in superannuation.

Mr Rogan said that investment bonds are intended for investors who want simplicity in investment, tax and estate planning, but that there is another class of investor who can also use the investment bond structure to their advantage.

“I am referring specifically to investors looking into the cost of aged-care, whether in a facility or at home. Because the investment bond structure re-invests income generated rather than distributing it, it can be used to reduce an investor’s total income, allowing him/her to maximize government benefits.

“And that’s where an investment bond can really help.

Mr Rogan concluded by saying “There’s no question that demand for investment bonds as a structure is growing. Investors can see the benefits, and are asking for more investment options, which is why we created three new funds, investing in property, cash and equities.

The structure is simple and tax-effective, and Australians assessing the costs of aged-care would be well-advised to look closely at what investment bonds can offer in terms of income minimisation,” Mr Rogan said.

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