Tax is often the biggest cost for investors, but they can feel very limited by the strategies available to reduce it. However, the impact of tax isn’t tomorrow’s problem.
Australia’s High-Net-Worth investor (HNW) segment continues to grow with 635,000 individuals recorded in 2023, who hold nearly $3 trillion in investable assets¹. Furthermore, it’s estimated that one million Australians will face the top marginal tax rate (MTR) by 2030².
Whilst only 28% of HNWs used a financial adviser in 2022-2023¹, the willingness to invest in advice is growing, with key areas of greatest concern being inheritance and estate planning, as well as strategies to reduce tax obligations.
Your generational wealth journey starts today, for tomorrow
As we forward think tomorrow, your tax journey isn’t just about the current generation, but to help build and safeguard future generations as well. The compounding effect of saving 1% p.a. in tax can lead to a future saving of 79.72% in increased return on initial capital over the long term³.
Exploring alternative tax structures
Understanding the tax treatment of various investment structures is crucial for high-net-worth individuals navigating today’s complex financial landscape.
Superannuation
A tax-effective structure where earnings on investments are taxed at 15% with the proposed Division 296 tax of an additional 15% on earnings, on balances above $3 million, on unrealised gains and accumulated earnings.
Corporate beneficiary
Company tax rate of 30% – in effect, a tax deferral strategy. Dividends paid are usually not frankable and beneficiaries’ personal marginal tax rates apply.
Trust
Distributions from trusts are usually passed through to be taxed at the beneficiaries’ personal marginal tax rates, with income often paid to those on lower rates.
The new generation of investment bonds
Taxed at a maximum of 30% but if tax optimised within the structure, this lowers the long-term effective tax rates to generally between 12%-15%⁴. Governed by Life Insurance and Tax legislation, investment bonds have a consistent legislative framework designed to facilitate both the accumulation and distribution of wealth. Investment bonds can offer greater tax-effective wealth transfers with ease.
Five reasons why a Generation Life Investment Bond is the ultimate complementary solution to super:
1.Steer clear of the proposed Division 296 tax on realised and unrealised gains of super balances over $3m
2. Minimise the impact of tax bracket creep while increasing after-tax investment returns
3. Create tax-effective, accessible income streams for early retirement before super access
4. Exceptional estate planning features with the ability to control how and when your wealth is transferred
5. Tax-free wealth transfers to dependants and non-dependants upon death
Generation Life has been at the forefront in innovating the tax-effective investing landscape through a new generation of investment bonds, across generations now for over 20 years.
Our proven and market-leading tax smart approach takes investing in an investment bond one step further and allows us to deliver enhanced after-tax return outcomes for our clients – with no additional investment risk or cost.
Speak to us
Are you looking for alternative tax-effective solutions to optimise and transfer wealth for your clients?
Book a consultation with one of our expert team members today to learn more about our innovative and flexible investment bond products.
1. Praemium Advising Australia’s Affluent 2023
2. Kehoe, J. and Read, M, One Million Australians face top tax rate by 2030, published Australian Financial Review 5 Oct 2022.
3. Using the average annual MSCI World ex-Australia (with net dividends reinvested) in Australian dollars index return over the 15-year period to 31 March 2024. Past performance is not an indication of future performance.
4. Estimated average tax rates being the estimated average annual tax as a percentage of earnings for each 12-month period over a period of 15 years. Actual tax amounts payable are not guaranteed and may vary from year to year based on, amongst other things, the earnings of an investment option.
Disclaimer
Generation Life Limited AFSL 225408 ABN 68 092 843 902 (Generation Life) is the product issuer. The information is general in nature and does not consider the investment objectives, financial situation or needs of any person. 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. Past performance is not an indication of future performance. The product’s Product Disclosure Statement (PDS) and Target Market Determination are available at http://genlife.com.au and should be considered in deciding whether to acquire, hold or dispose of the product.
