The smart choice for tax effective investing

Education often ends up costing much more than we anticipate. So, when setting up a dedicated investment for education, it’s worth exploring what tax benefits are available through an Education Bond, such as our Futurity EdSaver.

Understand the tax benefits of Education Bonds

Understanding investment bond rules (non-education withdrawals)

The graphic below illustrates the special tax rules that apply for Education Bonds if you happen to withdraw your investment earnings for something other than to fund education costs.

If you access any investment earnings after 10 years from the date of your initial contribution, and you also satisfy the 125 percent rule, the amount you receive will be tax free in your hands.

The 125 percent rule allows you to make additional contributions to your Bond each year, provided they’re not more than 125 percent of the previous Bond year’s total contributions. Of course, you may make unlimited contributions in your Bond’s first year.

If you withdraw investment earnings within the 10 year period, an apportioned amount (refer to graphic above) will count as part of your assessable income and be subject to tax at your marginal tax rate (MTR). But the good news is you will be entitled to receive a 30 percent tax offset on the assessable amount, to compensate for the tax already paid by us on fund earnings.