Renato Mota
Dealing With IOOF

Budget 2009: Investment bonds - a reliable alternative in an uncertain landscape

By Renato Mota

The 2009 budget reinforces the need to identify tax-effective investment strategies outside of superannuation as a key component of financial planning, a role that investment bonds have successfully filled for decades.

Considering that the 2009 Budget has amended superannuation changes that were introduced only three years ago, superannuation is an asset with an uncertain landscape. The constant changes and lack of future certainty in superannuation undermine the need to encourage the population to save for retirement in a well diversified manner.

Superannuation has historically been attractive because of its tax effective savings structure designed for retirement. However, the recent budget announcements have tightened caps to concessional superannuation contributions as well as reduced the government’s co-contributions program, ultimately restricting an investors ability to rely solely on superannuation for retirement needs.

It’s time for investors and advisers to consider other tax effective investment vehicles to save for lifetime-goals. Investment bonds are arguably one of the most flexible investment products in Australia, and are designed to encourage medium to long-term savings for any purpose.

To help people save for lifetime needs, we have developed IOOF WealthBuilder (WealthBuilder), a tax-effective investment product designed to meet the differing needs of clients at various milestones in their lives. As an investment bond, it offers Australians a simple way to build savings and wealth and can be used as an alternative tax effective investment vehicle to superannuation.

Whilst superannuation has been used as a ‘political football’ as part of broader agendas of late, the same can’t be said for investment bonds – its legislation and treatment has experienced very few changes over the past 20 years. WealthBuilder provides investors with a simple savings alternative under a tax structure which can be utilised for any purpose. It provides flexible contribution options including a regular savings plan to assist in saving for future goals such as retirement, a home renovation, an extended holiday, a small business purchase, a child’s education or first car.

Unlike traditional investment products, such as unit trusts, earnings from a WealthBuilder investment are taxed in the hands of IOOF, rather than the investor. There is no need for investors to report earnings to the ATO while the investment is retained in the WealthBuilder account. When held for a full 10 years, investors receive the value of the investment bond with all tax paid, which means that no further tax is payable by the investor. Importantly, the investment can be accessed at any time, although benefits are maximised over a medium to long-term time horizon.

With superannuation being one of the most significant assets outside of the home, the impact of continual changes on the advisory community cannot be underestimated. These changes are creating significant pressures on advice practices. We believe IOOF WealthBuilder will provide financial advisors with a genuine alternative to addressing superannuation’s critical issues with their clients.

For more information about IOOF WealthBuilder please click here.