Bonds could provide tax relief for high income earners
High income earners could sidestep the Federal Government's 2 per cent Temporary Budget Repair Levy by investing outside of their superannuation fund in investment bonds.
Following the announcement of the new levy, head of technical services at IOOF, Damian Hearn, said investment bonds — taxed at the company tax rate — would provide those earning more than $180,000 a year, an opportunity to make a taxation saving of 20.5 per cent, compared with an investment portfolio.
"For a high income earner — earning over $180,000 — by the time the Medicare levy goes up [to 2 per cent] and we also see this temporary budget relief levy comes in we're basically on the top marginal rate of 45 per cent, we actually see our top marginal tax rate in Australia rising to 49 cents in the dollar," he said.
"We're seeing a lot of focus on our investment bond, especially since the Government reduced the contribution caps for super... so a lot of people have looked for an alternative outside super."
Hearn said investing in investment bonds would enable clients to take advantage of the proposed cut in the company tax rate — from 30 per cent to 28.5 per cent — while limiting their exposure to the top marginal rate.
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