IOOF WealthBuilder even more attractive and still accessible

By Geoff Kellett, Head of Sales

For one of the first years in living memory, superannuation and financial services appear to have escaped the Federal Budget without any major changes. Whilst it was primarily an expenditure cutting Budget, there was certainly some good news for investors in IOOF WealthBuilder.

What are the proposed changes that impact the investment bond1?

  • The reduction in the company tax rate to 28.5 per cent from 1 July 2015.
  • The introduction of the ‘Temporary Budget Repair’ levy from 1 July 2014 till 30 June 2017.
  • The increase in the Medicare levy from 1.5 per cent to 2 per cent from 1 July 2014.

Under the proposed changes, as the investment bond is internally taxed, its tax effectiveness will increase as the reduction in the company tax rate may reduce the tax paid within the bond and there are no changes to its accessibility or flexibility. Furthermore, the introduction of the temporary budget repair levy for a high income earner also makes the investment bond particularly attractive. Those earning above $180,000 per annum may access a tax saving of 20.5 per cent (for example, 49 per cent less 28.5 per cent for the 2015/16 financial year) by investing in the investment bond in comparison to an investment portfolio.

The following table outlines the total tax saving by investing in the bond instead of a high income earner being taxed on the investment income.

Highest MTR 45.0 45.0 45.0 45.0 45.0
Temporary Budget Repair Levy - 2.0 2.0 2.0 -
Medicare Levy 1.5 2.0 2.0 2.0 2.0
Total tax rate 46.5 49.0 49.0 49.0 47.0
Less company tax rate/bond tax rate (30.0) (30.0) (28.5) (28.5) (28.5)
Total tax saving 16.5 19.0 20.5 20.5 18.5

Note: Taxation is only one factor to consider when making a decision to invest in a financial product. Please note that certain tax considerations apply to investments that are redeemed before the ten year tax period. For more information please refer to the PDS.

What do the proposed changes in superannuation mean for investment bonds?

Even though the concessional and non-concessional contributions cap will increase from 1 July 2014, these changes will still assist high income earners earning above $180,000 who are able to invest in the bond in a tax efficient manner whilst retaining access to the funds.

It’s also interesting to note that as the aged pension has been pushed out – this may also push out the preservation age to age 65. More and more advisers are using investment bonds as an alternative to super due to its accessibility and we anticipate that this change will increase the demand for IOOF WealthBuilder as a very tax effective non-super savings vehicle.

For more information go to or speak to your Business Development Manager.

1  Not all measures announced in the Federal Budget may be enacted into law in the form announced. IOOF does not undertake to notify recipients of any changes in the measures, the law or its interpretation.