Investment bonds can be a suitable option for those looking for a tax-friendly environment outside of superannuation.
My partner and I are on the 45 per cent and 37 per cent tax brackets. We maximise our concessional contributions into super. We invest our extra cash regularly and have an $800,000 ETF portfolio outside of super. Should we continue directing future savings into our share portfolio, or instead make non-concessional contributions into super, or invest through investment bonds? I heard investment bonds have high fees and poor returns.
Investment bonds operate in a somewhat similar way to superannuation. They pay tax within the bond and as a consequence investment earnings do not need to be included in your personal tax return. If the withdrawal occurs after 10 years, the investment is considered fully tax paid, and you are not obliged to top that up if you are on a higher tax bracket. There are extra details here with years 9 and 10 of ownership having a few wrinkles, and some limitations around additions to the portfolio. This is definitely an area where you need to get professional advice.
The fact that you have a good size portfolio outside super provides you with considerable flexibility, but in evaluating whether to send more savings into super, you need to reflect on the potential access requirements for these monies.
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