Sue Herrald
Dealing With IOOF

Creating wealth tax effectively via WealthBuilder

By Sue Herrald, Investment Specialist

Superannuation is one of most tax-effective ways to invest for your retirement. However, there is another tax-effective investment product that you may not know about. It is called WealthBuilder.

WealthBuilder is a 'tax paid' investment bond. This means that tax on investment earnings is paid by IOOF. As IOOF is the tax-payer, the investor does not need to declare ongoing investment earnings as assessable income in their personal income tax return whilst the monies remain invested. This potentially makes WealthBuilder a more tax-effective vehicle than a comparable managed fund.

WealthBuilder also gives investors the opportunity to use the power of their original investment to access additional funds – through a loan facility – to invest in other income-producing assets.

Investors with a WealthBuilder investment bond have access to a straight-forward and tax-effective loan facility, whereby they can borrow money from IOOF using their WealthBuilder investment as security for the loan. This loan facility allows investors to access interest-only loans, with the principal generally being repayable when the WealthBuilder investment matures or is surrendered by the investor.

The current borrowing capacity is based on the balance of the investors' WealthBuilder investment portfolio and is subject to maximum limits depending on the fund or funds that they are invested to.

For individuals who are interested in gearing as a wealth accumulation strategy, the current borrowing interest rates on the loan facility from 1 July 2010 are:

  • Fixed rate: 6.05% pa payable annually in advance.
  • Variable rate: 5.78% pa quarterly variable rate paid annually in arrears.

The borrowing rates are reviewed quarterly.

For further information about WealthBuilder, please call Sue Herrald, Investment Specialist on 1800 659 634.