Why insurance bonds will become your best friend


Insurance bonds might sound like the most uninteresting thing you could possibly think about.

However, as far as financial strategies go, these guys will be your financial best friend.

An insurance bond is essentially an investment vehicle, much like your superannuation, that allows you to make investments over time. It requires an initial contribution, and can then either be left with a one-off amount, or have further contributions made to the bond each month (like a savings plan).

Apart from having a wide range of investment options available to purchase, insurance bonds are an incredibly effective tax structure for those on higher marginal tax rates.

Any earnings on these investments are taxed within the bond itself and you don’t need to declare them on your personal tax return each year (unlike any interest you may earn from your bank accounts, rent on a rental property or dividends from a share portfolio).

Earnings are taxed at a maximum of the Australian company tax rate (30%), so if you’re on a marginal tax rate that’s higher than this, this is a huge benefit.


We know you’re excited by these tax benefits, but it gets even better.

At the end of a 10 year period, you’re able to exit your investment completely capital gains tax-free. This could end up saving you thousands and thousands of dollars.

For those on lower tax brackets, this investment vehicle can still be beneficial as your income will likely be increasing every year (as will your tax payable) and the sooner you establish the bond, the sooner you are able to exit the investment.


There’s also some non-financial reasons why these bonds could be a great idea for you.

WE generally consider them to be a 10-year investment strategy, which means they suit longer term goals well. This might be providing for children’s education or perhaps smashing down a mortgage.

Or, you could implement insurance bonds to simply provide you with a whole host of options in 10 years time. We know that you don’t always know or can’t even imagine what the future holds.


But that doesn’t mean you can’t plan to give yourself that flexibility.

Having a regimented structure of an insurance bond can also help to drive positive habits, in thinking and working for long term plans. These positive restrictions can help to keep you on track over the long term. That way, you’re always giving yourself the best chance to succeed in the future.

To learn more about the insurance bond you have in place, or if insurance bonds are for you, contact us.


Disclaimer: all information contained within this article is of a general nature. Do not rely upon it when making financial decisions. Please consult a professional financial advisor or planner (like us!) before acting.