Investment bonds are a practical investment option for those who earn a high income and seek long term tax efficiencies.
Investment bonds, also known as tax-paid, insurance or growth bonds, work similarly to a managed fund, except they are combined with an insurance policy. There is a ten year rule which allows tax free earnings on the bond if no withdrawals are made in the first ten years and contributions do not exceed 125% of the previous year’s contribution. Most investment bonds offer a range of investment options to cater for differing risk levels such as cash, fixed interest, shares, property or a range of diversified investment options.
Investment bonds are particularly suitable for high income earners with a marginal tax rate higher than 30% who want to build wealth without increasing their personal tax liability. They are also useful for estate planning purposes as beneficiaries other than dependants can be nominated and will not incur tax upon receiving proceeds.
An investment bond can be used as an investment structure for future financial needs of children such as education expenses. Alternatively, investment bonds can be used for supplementary retirement planning as investment bonds are not subject to preservation age, unlike superannuation investments, which may be more viable for those planning an early retirement.
Investments held in an investment bond are generally not subject to capital gains tax (CGT). Where an investment does not qualify for a CGT discount, the maximum tax rate of 49% may apply on earnings whereas an investment bond generates a maximum rate of 30%.
However, investment bonds do carry some risk that individuals should consider before making a decision. Common fees such as establishment, contribution, withdrawal, management, switching and adviser service fees may be applicable depending on your provider and the investment options you choose.
If you do choose to invest in an investment bond ensure you will be able to make regular contributions over the lifetime of the investment and can comply with the 125%. It is important to align your financial and estate planning goals with an appropriate investment structure suitable to your risk profile.
The national rental affordability scheme (NRAS) started on 1 July 2008, encouraging large-scale investment in affordable housing. It offers tax and cash incentives to providers of new dwellings for 10 years, granted they are rented to low and moderate income households at 20% below market rates.
Though the NRAS is no longer taking new investments, property owners within the scheme will soon be receiving letters from the ATO to remind them of their claim requirements.
The two key elements of the NRAS are;
- An Australian Government contribution in the form of a refundable tax offset or direct payment to the value of $8,394.10 per dwelling per year in 2018-19. The Australian Government contribution is 75% of the total annual incentive.
- A state or territory contribution in the form of direct financial support or an in-kind contribution to the value of at least $2,798.03 per dwelling per year in 2018-19. The state or territory contribution is 25% of the total annual incentive.
Owners of NRAS rental property are eligible to claim a refundable tax offset if:
- The Approved Participant has provided them with advice of their entitlement based on the certificate received from the Housing Secretary, and;
- The claim is made in the year to which the certificate relates.
Deductions can be claimed for expenses incurred with a NRAS rental property, excluding the contribution amount received from the state or territory. The contribution amount is non-assessable, non-exempt (NANE) income for tax purposes.
Cloud computing is redefining the way small businesses conduct business; the advantages in the technology allow users to access data off-site, save on IT equipment and give businesses a competitive edge.
Here are a few benefits of switching your business to the cloud:
Growing businesses with a need for greater accessibility, i.e., flexible working arrangements for staff and so on, can benefit immensely from the cloud. Provided there is internet connection, you can access data from home, while on holidays, commuting or virtually anywhere across the globe.
Reduced hardware costs
Moving to the cloud can be likened to renting – you pay for your services through a cloud computing service provider. This means you don’t need to purchase expensive IT systems and the costs of operating and upgrading these systems are removed. Instead, the cost of new hardware and software, etc., is included in your contract.
Cloud computing has the added perk of providing regular and automatic software and security updates for you. Not only does this keep your technology up-to-date, it frees up time that would otherwise be spent manually updating systems.
Increased collaboration and control
Employees and third parties can access and work on projects at any time and from anywhere. Information stored in the cloud, such as files or documents, allow everyone to see the same version and include real-time visibility, so any changes made will be instantly updated.
Would you like to integrate cloud computing with your business, but not sure where to start from, consult Glance Consultants for some great ideas!