Investment bonds provide a range of investment strategies in a simple tax-effective package, and are increasingly becoming part of every adviser’s consideration set.

Whilst individual needs should be considered, the potential taxation concessions and estate planning benefits mean that investment bonds can be a very important tool for advisers and their clients.

Investment bonds – smarter investing
Once mainly considered an alternative investment to superannuation, investment bonds (also known as insurance bonds) have re-emerged and are now being more broadly understood as a genuine solution for smarter investing.

At their simplest, investment bonds combine features of a managed fund and a life insurance policy, with the added benefit of the investment bond provider paying 30 per cent tax on any earnings in the bond, rather than an individual paying tax on earnings at their marginal tax rate. Just like a managed fund, clients can select from investment options that invest in assets such as shares, fixed interest, property and cash.

More advisers are moving away from pigeon-holing investment bonds mainly as an alternative to superannuation and, instead, are considering the use of investment bonds for a larger range of clients and a broader range of investment strategies.

These strategies can range from finding ways to manage and provide value in estate planning strategies to tax-effectively saving for a child’s education or investment fund. For high-income earners, investment bonds are rapidly growing in popularity due to benefits such as tax being paid by the provider and the ability to access money at any stage.

As well as an alternative to superannuation, investment bonds are being seen as versatile and can be used as an investment diversification tool as well as a savings vehicle for a specific goal. As a result, clients – from high-income earners to pre and post-retirees, to parents and children – are benefiting from these investments that are proven to be both tax-effective and flexible.

Key reasons for the interest in investment bonds are:

  • Tax-effective investing. More and more clients are seeking ways to invest tax-effectively. When compared to superannuation at 15 per cent and a marginal tax rate of up to 47 per cent (including Medicare Levy), tax on earnings in an investment bond, when the 10 year and 125 per cent rules[1]* are met, sits firmly in the middle at 30 per cent. In addition, there are no capital gains tax implications if clients switch between investments or transfer ownership.
  • Certainty of the investing environment. The rules around investing in superannuation have been subject to continual change and this is expected to continue. Even in the last year, there have been changes to the superannuation contribution caps, additional tax on contributions for those who exceed the $250,000 income threshold, and a cap imposed on the amount that can be held in the payment phase. Unlike superannuation, the main rules relating to investment bonds, offered under the Life Insurance Act (1995), have remained unchanged. This relative regulatory stability for investment bonds is coupled with the benefit of not having your money locked away until you meet specific conditions of release, like those required to access superannuation.
  • Market volatility. In a volatile investment market and a low interest rate environment, clients are still seeking growth, but also seeking the safety of capital guarantees. Providers like CommInsure offer clients the ability to diversify between investment options with exposure to growth and defensive assets. CommInsure is also the only investment bond provider to currently offer two types of guarantees:
    • Death benefit guarantee, which provides certainty on the minimum amount that will be paid on death, subject to certain requirements, andInvestment option guarantee, which is designed to provide certainty around the minimum value of a client’s holdings in an investment option. For more information on the guarantees, refer to the Product Disclosure Statement.
  • An ageing population. Estate-planning expertise will become more in demand with older clients seeking certainty and control for what may be one of the biggest intergenerational transfers of wealth in recent years. Clients want peace of mind. They want to know that the proceeds of their estate will be distributed as per their wishes after they pass away. Unlike superannuation, investment bonds don’t have trustee discretion or restrictions as to who can receive the benefit and there are no additional tax implications if paying to a non-dependant (e.g. adult child). Nominated investment bond beneficiaries can also receive the death benefit without it being included in a contested estate (except possibly in NSW where a bond may form part of a ‘notional state’).

For more information on CommInsure Investment Growth Bonds and our guarantees, please visit our website.


This is general information only and does not take into account your individual objectives, financial situation or needs. You should assess whether the information is appropriate for you and consider talking to a financial adviser before making any investment decision.

‘CommInsure’ is a registered business name of The Colonial Mutual Life Assurance Society Limited ABN 12 004 021 809 AFSL 235035 (CMLA). CommInsure Investment Growth Bond is issued by CMLA. A copy of the CommInsure Investment Growth Bond Product Disclosure Statement is available here.

[1] Any contributions made after the first 10 years can be withdrawn tax free regardless of when the contribution was actually made. Each year simply invest up to 125 per cent of the previous year’s contribution to take full advantage of this benefit

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