10Invest

 

Note: This information is general in nature. Please consult your tax professional for advice specific to your situation.

10-year rule:

The 10-year rule governs how withdrawals from your investment are taxed.

You can withdraw after 10 years with no personal income tax to pay (10Invest pays tax on your earnings at a rate of 30% on your behalf) subject to the 125% rule.

However, if you withdraw within the first 10 years, income tax is payable on your investment earnings. The assessable amount will vary depending on when you make withdrawals within the 10 years.

125% rule:

You can make additional contributions over the life of your investment in 10Invest.

During the first year there is no limit to the amount you can contribute. The value of investing as much as possible during the first year is that you can contribute more in subsequent years.

Each following year, your contribution should not exceed 125% of the previous year. If you exceed 125% in any year, the start date of the 10-year rule will reset to the financial year of excess contributions. 

Key points to remember:

• After 10 years: Income tax-free withdrawals.
• Within 10 years: Investment earnings are taxable, but you receive a 30% tax offset.    
• Yearly contributions: Can increase by up to 125% without affecting your 10-year period.

You can invest on behalf of a child between the ages of 1 to 16 while retaining full control of the investment.

It can then be transferred to the nominated child at a vesting age between 10-25 years that you choose. The policy seamlessly transfers to them, preserving the 10-year tax benefits.

What is an Investment Bond?

An Investment Bond is a long-term investment plan with tax advantages, provided by friendly societies and life insurance companies. Your money is pooled with other investors and invested in chosen options. It’s most tax-effective when held for 10 years or more.

Uses of an Investment Bond

Investment Bonds can be used for:

• Investing for a child’s future 
• Investing to complement superannuation
• Estate planning outside of a will
• Holidays
• Investing to save for renovations
• Investing to save for holidays 
• Supplementing retirement income
• Investing to save for long-term financial goals 
  
  
  

The 10-year rule

Holding an Investment Bond for 10 years allows you to withdraw your money with no personal income tax on the investment earnings.

Factors affecting tax effectiveness

• Withdrawals within the first 10 years
• Contributions exceeding 125% of the previous year
• Skipping a year of contributions and then contributing the following year

Impact on your income and/or social security benefits

If you hold your investment longer than 10 years:

• Your investment returns won't increase your assessable income
• Your social security benefits generally won't be affected

If your marginal tax rate is below 30%, you should obtain financial and taxation advice before making a decision to invest in 10Invest.

 

Read the PDS

Who can invest?

Individuals, joint investors, and trusts can invest with 10Invest. Trusts need to apply via a paper-based form.

What is the minimum investment

A minimum deposit of $1,000 via Direct Debit is required. You can also set up a Regular Savings Plan with at least $50 per investment option per month.

To apply you must:

• Be at least 16 years old
• Be an Australian resident

You’ll need:

• Latest contact details
• ID (passport, driver’s license, Medicare card, or birth certificate)
• Bank details (BSB & Account number)
• Ensure you read and understand the Product Disclosure Statement (PDS).

Who is Vanguard®?

Vanguard® is a global mutual company, founded in 1975. Its structure aligns their interests with those of their investors and drives the culture, philosophy and policies throughout the Vanguard® organisation, both here in Australia and globally. Vanguard® is one of the world’s largest global investment management companies. In Australia, Vanguard® has been serving clients and institutional investors for more than 25 years. Vanguard® Investments Australia Ltd ABN 72 072 881 086, AFSL 227263.

Choosing the right option

Read the PDS to match your risk appetite. Conservative options suit low-risk investors, while growth options are for those comfortable with higher risk.

Multiple investments

You can invest in one or multiple options. The minimum investment is $1,000, which can be spread across different options. You can change your investment options anytime.

Parties involved

Owner: The person who owns the bond and makes decisions.
Life Insured: A nominated person whose life is insured. The bond can be redeemed tax-free if they pass away before the 10-year period ends.
Beneficiaries: Recipients of the bond’s proceeds if the Life Insured passes away (optional).
Nominating a Life Insured: Nominating a Life Insured ensures the bond matures tax-free upon their death. The owner is automatically the Life Insured unless otherwise specified.

Changes

You can nominate or change the Life Insured anytime. The policy matures when the last nominated Life Insured passes away.

Beneficiary eligibility

Beneficiaries can be any age, non-related, or entities like companies, trusts, or charities.

Annual investment limits

First Year: No limit on contributions.
Subsequent Years: Contributions must not exceed 125% of the previous year’s amount.

Changing your Regular Savings Plan

You can adjust your regular savings plan anytime but remember the 125% rule applies and there is a minimum of $50 per option per month.

Withdrawing your money

Withdrawals can be made anytime for any purpose but may affect the tax effectiveness. Withdrawals within the first 10 years are subject to the following tax rules:

1st to 8th year: Tax on all earnings
9th year: Tax on 2/3 of earnings
10th year: Tax on 1/3 of earnings
After 10 years: No tax

Minimum withdrawal amount

The minimum withdrawal is $500 and you must maintain a minimum $1,000 account balance.

Capital Gains Tax (CGT)

Realised growth is not treated as a capital gain. No CGT applies for switching investment options or making withdrawals. Withdrawals within the first 10 years are taxed at your marginal rate with a 30% tax offset.

Contributions: Money you put into an investment to help it grow.

Investment earnings: The money made on top of the original amount (capital contributions) you invested.