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Australian 10 Year Tax Rule Guide
Technical Guides • Australian 10 Year Tax Rule Guide
Australian 10 Year Tax Rule Guide
The 10 year tax rule is a tax incentive that can benefit Australians and those who are planning on relocating to Australia. The rule states that an investment that is held for ten years can be withdrawn tax-free as long as certain criteria are met.
This in-depth guide includes
- Investment & insurance bonds
- International investment bonds
- Australian tax benefits of an international investment bond
- The 10 year rule
- The 125% rule
- Overview of the ATO legislation
FAQs
The 10 year tax rule is a tax incentive that can benefit Australians and those who are planning on relocating to Australia. The rule states that an investment that is held for ten years can be withdrawn tax-free so long as:
- The investment is held within a life insurance-wrapped platform
- The amount you put in every year cannot be more than 125% of the year before
An ATO-compliant international investment bond provides the following potential benefits to the Australian expatriate (or anyone likely to be resident in Australia in future):
- Tax free growth –no capital gains tax due, either when abroad or at home
- Tax free income –no tax due on withdrawals after 10 years, even if resident in Australia
- No tax reporting –except on withdrawals before 10 years if resident in Australia
Yes.
Investors in investment bonds can make additional contributions each year. If the contribution does not exceed 125% of the previous year’s contribution, it will be considered part of the initial investment.
- If you withdraw before 8 years then the tax benefit will not apply
- During the 9th year, 1/3 of the amount will be tax-free
- During the 10th year, 2/3 of the amount will be tax-free
- After the 10th year, the whole amount can be taken tax-free
All the things you need to know
This guide was created by our tax advisers. Our advisers are some of the best in the world and understand the pains of trying to manage and understand tax rules in multiple jurisdictions. They have put together this easy-to-follow guide to help and inform Australians who may have questions about the 10 year tax rule.
This guide was last updated in April 2021.
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