End of Financial Year

Now that June is coming to a close, it’s a perfect time to think about getting all your financials in order.

– Have you got several super funds you’ve been thinking about consolidating?
– Is your personal insurance cover adequate to protect you and your family?
– Do you have a term deposit nearing maturity?

– Is it time to make plans for your retirement?
Call Array Today!
9730 1622


Brexit Jitters

The ‘leave’ campaign for Britain to exit the European Union (EU) – focusing on the emotive topic of immigration – has clearly been doing a good job with polls showing a slight lead over the ‘remain’ campaign.

To read key points regarding the referendum and its implications are available at this link:
*source: AMP Capital


Staff News

Alex, has been involved in the planning of the Yarra Glen Winter Lights Festival that will be held on the 20th August. This is the second consecutive year for the festival and will have an ‘Enchanted’ theme. As well as the handmade lanterns in shop windows, there will be a festoon of lights and buskers scattered along the main strip.

Developing a savings plan using investment bonds

Saving and investing your savings regularly over the medium to long term can help build a growing nest egg.
Setting aside regular amounts from as little as $100 a month can help clients build a substantial asset over time with the potential to benefit from the power of compounding returns.

Children saving and investing plans
When investing for children, a key decision is to decide who should own the investment. The options include investing in the:
• Child’s name
• Parent’s name (or another adult’s name e.g. grandparent) – consider who has the lowest tax rate.
• Parent as trustee: held in the name of the parent in trust for the child
Tax is an important consideration in this decision because special tax rates apply to income derived by children under the age of 18 (defined as a minor). These rates may be higher than adult rates to deter parents from strategies that split income with their children.

Children may receive money from relatives for special occasions like birthdays, Christmas and more regular‘ pocket money’. If the children already have a lot of toys and gadgets and are likely to end up spending their money on things that provide short-lived joy, perhaps they can be encouraged
to save. An alternative is to invest this money into a tax-effective savings plan like an investment bond. The savings can accumulate towards the child’s first car, holiday or deposit on a property. And after 10 years, they will pay no tax on withdrawals. Clients should take care when determining how to structure the child’s saving and investment plan to ensure the child does not pay excessive tax on earnings. Saving and then investing in an investment bond may avoid these high rates of tax. The maximum tax paid on earnings and capital gains within an investment bond is 30% although franking credits and tax deductions can reduce the effective tax rate. A key feature of investment bonds is that if the investment is withdrawn after 10 years, no further tax is paid by the investor. However, if the investment is withdrawn within the first 10 years, the investor will pay tax on the assessable portion of growth as shown in the table below.
Investment Bond Case Study
Archie has his 8th birthday coming up. His parents David and Betty and broader family find it difficult to choose presents for him as he seems to have all the toys and clothes he wants. His parents and grandparents prefer to put their money towards a gift that will provide him with a longer lasting benefit. His parents are both on high marginal tax rates and decide to gift him $1,000 to start an investment bond savings plan that can be accessed after he turns 18. His grandparents and parents together provide him with a monthly amount of $100 to invest into his investment bond savings plan. Each year, the regular savings amount invested in the bond is increased by 25%. Assuming his investment returns 4% income (70% franked) and 3% growth, the savings plan is expected to grow to just over $49,000 (tax paid) by Archie’s 18th birthday.

The benefits of an investment bond savings plan include:

• Investment bonds provide a tax-effective alternative to other savings vehicles. Hefty tax penalties apply to minors if they earn more than $416 from investments.
• With tax at 30%, investment bonds offer a tax-effective savings option for high income earners, especially if the money can be left invested for at least 10 years. This may compare favourably to investing in a unit trust where earnings would be taxed at their marginal tax rate (which can be as high as 45% plus Medicare and the Temporary Budget Repair levy).
• The investment bond offers simplicity as earnings are automatically reinvested in the bond. This means reinvestment dates do not need to be tracked for capital gains tax purposes. Investors can switch between investment options without triggering capital gains tax.
• Investment bonds suit investors who invest under a regular savings plan. Provided deposits each year do not exceed 125% of the previous year’s contribution, the 10 year period for each additional investment is backdated to the original commencement date.
• Investment bonds may also suit parents and grandparents who wish to invest for a child’s education.

For more information:

Call Array today (03) 9730 1622

Investment Bonds offer a tax effective investment vehicle outside of superannuation. They have features that investors should consider if they wish to invest outside of superannuation. Suitability of an investment in an Investment Bond will depend on a person’s circumstances, financial objectives and needs, none of which have been taken into consideration in this advertisement. Prospective investors should obtain and read a copy of the relevant Product Disclosure Statement (PDS) and consider the information in the PDS in light of their circumstances, objectives and needs before making a decision to invest. We recommend that prospective investors consult with us. This document is not an offer to invest in Investment Bonds. Investment in Investment Bonds are subject to risk as detailed in the relevant PDS.