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Under the bonnet – The AMP Growth Bond

22nd July

 

This is the second in our series of articles that looks in-depth at the features and benefits of one of the AMP Life product suite. Our first article on Conventional Products can be found here (link to that edition).

The AMP Growth Bond (Growth Bond) is an insurance bond and is a simple investment solution that allows the investor to build wealth over time. The bond is a life insurance policy (without a risk component) issued by AMP Life Limited.

The Growth Bond is designed to meet a range of investor profiles with different needs. It is suitable for any investor wanting to achieve a longer-term savings goal or for those investors on marginal tax rates over 30% and wanting to invest for at least 10 years. It caters for those investors wanting to invest for a child or grandchild, with the option to automatically transfer to them when they reach a specified age. The Growth Bond allows the opportunity for investors who want to invest now but may not have a large lump sum. Subsequently, it may appeal to those who are looking to make specific estate planning arrangements.

The Growth Bond is a ‘tax paid’ investment allowing for a simple and tax effective way to invest while lowering the tax liability.

What are the tax benefits?

The Growth Bond takes advantage of the unique tax treatment offered by this type of product. Tax is paid on any investment earnings within the insurance bond at the company tax rate of 30% (less imputation credits). Where an investor holds their policy for more than 10 years, the investment gain can be withdrawn "tax paid" (i.e. investors do not need to pay personal income or capital gains tax on any investment gains), provided the 125% contribution limit is not exceeded in any year.

How is tax paid on investment earnings?

Any tax on investment earnings is calculated at a current maximum rate of 30% and paid within the product. This is built into the daily unit price. As a result of this investors will not be required to declare details of their investment on their personal income tax return unless a withdrawal is made during the first 10 years (commonly referred to as the 10-year tax rule).

What is the 10-year tax rule?

Where the Growth Bond is held for 10 years or more and the 125% contributions limit is adhered to the investor will not be required to pay any personal income tax on withdrawals. All withdrawals will be received tax paid after this time.

What is the 125% contribution limit?

An investor can contribute up to 125% of their previous year’s contribution without re-starting the 10-year tax rule period (e.g. year 1 $10,000, year 2 $12,500, year 3 $15,625 etc). If, however, an investor contributes more than 125% of the previous year’s contribution or does not contribute one year and then decides to contribute in future years, the 10-year tax rule period will re-start.

Switching between investment options will not affect the 125% rule or the 10-year tax rule.

Flexibility offered for all

Applications are accepted from a wide range of investors including individuals, joint investors (up to two policy holders) sole traders, trusts, companies and deceased estates can invest in a Growth Bond. A child advancement version can also be established.
Please note Self-Managed Super Funds are specifically excluded as the tax rates on super funds is 15% compared with the rate within the Growth Bond of 30%.

More information

Please visit amp.com.au/growthbond for the latest AMP Growth Bond product disclosure statement. Alternatively please contact the Mature Products team for more information.

Important information

Any advice and information on this website is general in nature and is provided by AMP Life Limited ABN 84 079 300 379 (‘AMP Life’), which is part of the Resolution Life group. The advice does not take into account your personal objectives, financial situation or needs. Therefore, before acting on the advice, you should consider the appropriateness of the advice, having regard to those matters.

Products in the AMP Eligible Rollover Fund, National Mutual Retirement Fund, and NM Pro Super Fund are issued by Equity Trustees Superannuation Limited ABN 50 055 641 757. Insurance and Investment products are issued by AMP Life.

AMP Limited ABN 49 079 354 519 has sold AMP Life to the Resolution Life group whilst retaining a minority economic interest. AMP Limited has no day-to-day involvement in the management of AMP Life whose products and services are not affiliated with or guaranteed by AMP Limited. AMP Limited is not liable for products issued by AMP Life or any statements or representations made in the PDS or policy documents for those products. “AMP”, “AMP Life” and any other AMP trademarks are used by AMP Life under licence from AMP Limited. AMP Life is part of the Resolution Life group and can be contacted on 133 731 or via the contact us page. If you decide to purchase or vary a financial product, AMP Life and/or other companies within the Resolution Life group will receive fees and other benefits, which will be a dollar amount or a percentage of either the premium they pay or the value of their investments. You can ask us for more details.

All information on this website is subject to change without notice.