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What is the 10 year tax rule?

Inheritance Tax • What is the 10 year tax rule?

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 The rule states that an investment that is held for ten years can be withdrawn

    • 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

A. The Investment Is Held Within A Life Insurance-Wrapped Platform

The two most common examples would be a Personal Portfolio Bond (PPB) or a Regular Savings Plan. The PPB would be best suited to people who have a lump sum of cash whereas the regular savings plan would be best suited to someone who wanted to pay into something monthly or quarterly. Regular savings plans generally allow you to invest in a variety of funds, including managed and tracking funds. A PPB allows you to invest in a broader variety of investments or simply hold cash.

B. The Amount You Put In Every Year Cannot Be More Than 125% Of The Year Before.

For example, if you put in $20,000 in year one, the next year the maximum you can put in is $25,000 and the following year the maximum is $31,250.

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What Happens If I Need My Money Earlier?

  • 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.

  • Why Is This Good For Australian Expats?

    Referred to as tax-paid investments, insurance bonds in Australia are taxed by the fund manager at the corporate tax rate of 30% subject to being held for a minimum of 10 years and do not need to be reported on an investor’s tax return.

    So, the tax is paid before you as an investor receive a profit. However, expats have access to international products and can set up these plans in offshore markets. When the products are set up outside of Australia they will not be subject to Australian corporate tax, leaving the investor 30% better off.

    Contact one of our advisers today to discuss your personal finance plan

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