Growth bonds are a popular way for parents, or even grandparents, to save for their children’s, or grandchildren’s, future school or university fees (a 2008 AMP.NATSEM Report showed that the average HECS debt for university students was over $20,500).
Many people also use Growth Bonds as a means of savings lump sum fund to aid with long service leave expenses such as travel.
With an investment bond, if the investment is held for more than 10 years with no withdrawals, the investor only pays 30 per cent tax on their investment earnings regardless of their marginal tax rate. As this tax is paid within the product itself, the investor does not have to declare these investment earnings in their annual tax return.
Growth bonds are ideal for people looking for a ‘set and forget’ savings plan outside superannuation to help them achieve their long-term financial goals. Money can be accessed at any time, although dipping into the investment before the first 10 years may reduce the tax effectiveness of earnings.