Australian’s have a number of choices when it comes to investing in different investment structures. Here’s a quick comparison table showing how insurance bonds, superannuation, and managed funds stack up in key areas for Australian investors:
Comparison of Investment Options in Australia
| Feature | Insurance Bonds | Superannuation | Managed Funds (Outside Super) |
|---|---|---|---|
| Tax Rate on Earnings | 30% (fixed company rate) | Up to 15% in accumulation phase; 0% in pension phase | Marginal tax rate (0–47%), CGT may apply |
| Tax Reporting | Not required annually (if rules followed) | Complex; depends on phase and fund | Required annually |
| Access to Funds | Anytime (may be penalised if early) | Restricted until preservation age | Anytime (subject to tax implications) |
| Ideal Time Horizon | 10+ years | Long-term retirement savings | Any duration, flexible |
| CGT on Asset Switches | No | No | Yes |
| Estate Planning Benefits | Direct tax-free payout to beneficiary | Can be nominated to dependents (tax treatment varies) | Subject to will and probate |
| Investment Flexibility | Moderate (depends on bond issuer’s options) | Broad, depending on fund or SMSF | High – access to broad range of assets |
| Contribution Rules | 125% rule per year (to keep tax-free status) | Complex: caps, age limits, work tests apply | No specific limits |
| Fees | Can be high, less transparent | Often low (esp. industry funds); SMSF costs vary | Varies – some low-cost, others higher |
| Best For | High-income earners wanting tax-effective saving outside super | Retirement saving with tax concessions | Investors seeking flexibility and liquidity |
Summary:
- Insurance Bonds: Good for high-income earners who’ve maxed out super and want simplified, tax-effective long-term investment with estate planning perks.
- Superannuation: Best for retirement saving due to tax concessions and compounding over decades.
- Managed Funds: Flexible and accessible, suitable for medium to long-term goals but with greater tax admin and variability.
