Proposed Division 296 sparks continued interest for investment bonds

With Labor now securing a majority Government, the proposed Division 296 tax is now expected to proceed to be passed into law. As legislation, it will target earnings on superannuation balances above $3 million by increasing the tax on earnings from 15% to 30%. Although the Bill did not pass before the election, Labor reaffirmed their commitment to the policy in the April budget. The Government’s majority looks like it will be a combined Labor and Greens Senate, meaning the Government may not need the support of crossbenchers to pass the legislation. Industry commentators are calling out that this may also further strengthen the Government’s position to potentially pursue other reforms targeting other wealth accumulation structures.

As legislation continues to evolve, it is more important than ever to diversify financial and wealth accumulation strategies. Investment bonds, for example, offer tax advantages, flexibility, and estate planning benefits — along with the current certainty that they won’t be affected by legislative reforms — making them a compelling option for those impacted by the changing legislative landscape, both now and in the future.

What High-Net-Worth Australians Need to Know

Generation Life’s Not Tomorrow’s Problem research revealed a concerning reality: nearly four in five Australians lack a strong understanding of the upcoming superannuation tax changes. This knowledge gap underscores the importance of financial advice and exploring alternative wealth strategies to navigate a shifting tax environment.

For many high and ultra-high-net-worth Australians, being proactive and exploring tax-effective wealth strategies is more important than ever.

For Australians actively building their wealth, it’s important to consider the tax-effectiveness of their long-term wealth accumulation strategies and consider whether there are alternative solutions. This is important in the context of an investor’s current position as well as the value of their future wealth, which over the long term, they may expect to increase.

For example, a 55-year-old earning $250,000 annually, with a current superannuation balance of $1,400,000 and contributing $40,000 in non-concessional contributions each year, is projected to retire with a superannuation balance of $3,632,782. This would place them above the proposed Division 296 threshold meaning a portion of their earnings may be subject to the additional 15% tax.¹

Why investment bonds are an attractive proposition

Investment bonds represent a highly tax-effective tool to accumulate wealth both pre and post retirement. Generation Life, Australia’s leading provider of tax-aware investment solutions, is uniquely positioned to support financial advisers and high and ultra-high-net-worth individuals in navigating their ever-evolving landscapes.

Key benefits of investment bonds for those seeking a tax-effective solution include:

Creditor protection: Investment bonds held by individuals can be protected from creditors in the case of bankruptcy if set up appropriately.

Tax-optimised wealth accumulation: Investment bonds are tax-paid structures, offering favourable tax outcomes. Long-term effective tax rates can look to being as low as 10–15% p.a. in Generation Life’s tax-optimised investment options.

Flexibility and access: Investment bonds allow access to funds before preservation or retirement age and with no lock-up periods, offering greater day-to-day flexibility.

Unrivalled estate planning features: Investment bonds offer the ability to control how and when beneficiaries receive inheritances. Optional features allow limitations on access, offering peace of mind and control over wealth transfer.

No death benefit tax: Proceeds are paid tax-free upon death, regardless of who the beneficiary is. Ownership can also be transferred to a nominated recipient with no tax event — ideal for succession and intergenerational wealth transfer planning.

Navigating the Future of Wealth Management

As Australia’s tax landscape continues to evolve, high and ultra-high-net-worth individuals must explore alternative investment strategies to protect and grow their wealth. The proposed Division 296 tax is another example of how the taxation landscape for pre-retirees as well as retirees can reshape their financial outcomes.

More financial advisers are now turning to investment bonds as a smart, tax-effective strategy for building long-term wealth for their wealthy investors. This is reflected in our inflows, which increased by 57% from December 2023 to March 2025, with financial advisers and their clients increasingly adopting investment bonds as a wealth-building strategy outside the superannuation system.

To learn more about how Generation Life Investment Bonds are a powerful tax-effective and flexible investment solution, visit www.genlife.com.au.

_{1. Assumes Year 1 to be the financial year beginning 1 July 2024, the general Transfer Balance Cap, wages growth and the concessional contributions cap for superannuation are indexed at 4% p.a. Super Guarantee contributions are assumed at 11.5% of salary in year 1 and 12% p.a. in the subsequent years. No increase in non-concessional contributions is assumed. Superannuation balance assumes a 7.5% p.a. return after fees and tax return.}

_{Generation Life Limited (Generation Life) AFSL 225408 ABN 68 092 843 902 is the product issuer and sender of this message. This communication is general in nature and does not consider the investment objectives, financial situation or needs of any person, and is not intended to constitute personal financial advice. The product’s Product Disclosure Statement (PDS) and Target Market Determination are available at www.genlife.com.au and should be considered in deciding whether to acquire, hold or dispose of the product. Investments carry risk. Professional financial advice is recommended. Generation Life excludes, to the maximum extent permitted by law, any liability (including negligence) that might arise from this information or any reliance on it. Generation Life does not make any guarantee or representation as to any particular level of investment returns. Past performance is not an indication of future performance. Factual information only is provided, not intended to imply any recommendation or opinion about superannuation products or superannuation investments.}