Investment Bond: Case Studies

To explore the benefits of investment bonds, we have gathered some real-life case studies of some of our amazing clients (with their permission). Names changed of course!


The professionals

Jim and Sophie are both 40, own their home outright and have a property portfolio, funded by debt. Jim is a doctor who earns $150,000 p.a. and Sophie is a lawyer who earns $300,000 p.a. They wish to have the option of retiring at age 50 and are currently maxing out their super contributions (remember they won’t be able to access their super until 60, which is ten years after they want to retire). Their marginal tax rates are 39% (Jim) and 47% (Sophie). As a result, they pay a significant amount of personal income tax and are doing their best to lower this using debts and depreciation within their property portfolio. However, they still have surplus cash and want to diversify away from the property.

We instructed Jim and Sophie to invest $100,000 initially and then another $5,000 per month ($60,000 per year) into an investment bond.

This caps the investment tax at 30%, and if they do not exceed the 125% rule and keep the bond for 10+ years, there will be no other tax payable in their own names (even as a result of investment income), nor any capital gains tax upon withdrawal. We forecast that the bond will be worth $1.4M in ten years’ time. From age 50, we intend to withdraw $50,000 per year as income for Jim & Sophie, to bridge the gap until age 60 when they can access their supers. We also have the option to make a lump sum withdrawal at year ten to pay off their property debts (which means the rent from their properties will now be an income stream to assist with their retirement).

Using the investment bond has capped tax at 30%, we’ve used excess cash flow to generate capital growth through the investment and then avoided capital gains tax by meeting the bond conditions. A great outcome.


The unlucky bachelor

Not only is Phil getting divorced, he has just shacked up with his secretary who has three kids with a former partner.

He is a great stepdad to his new partners’ kids, but he wants to ensure that most of his assets are left to his biological children from his previous marriage. Phil earns $130,000 (so he is in the 39% tax bracket), has good consistent income and has been forced to sell a big commercial property asset as part of the marriage settlement. He has no plans to retire and will work until ‘he starts pushing up daisies’. I have a soft spot for my unlucky mate Phil…

Phil has cash left over and wants to invest for the long term. He is 66, has a healthy super balance but his main goal is to ensure his four biological adult children receive most of his wealth. We set him up with four separate investment bonds worth $200,000 each. Phil remains the owner of the policy but nominates each child as the beneficiary. Upon his death, he hopes that each child will receive the funds directly, without passing through his estate. This will ensure his current partner (and her children) plus his former partner cannot challenge his will and drag the estate through the courts (draining the estate through legal fees).

Nominating beneficiaries directly allows Phil to retain control of the funds while he is alive, but also control the flow of funds to his children with greater certainty. By comparison, if Phil left $800,000 in his bank account, then upon his death those funds would form part of his estate and MAY be contested and end up in the wrong hands (even if his Will nominated his children as beneficiaries).

Using four investment bonds, Phil has achieved tax efficiency and ensured his money passes directly to his children upon his death, which is important to him.


The grandparents

Steve and Barbara are retired after successful professional careers. They are self-funded retirees and have 3 children and 6 grandchildren. They like the simple things in life and want to help their family.

They decide to invest $25,000 into 6 separate investment bonds – one for each grandchild. They own the policies jointly and are the lives insured but nominate a single grandchild on each bond as the beneficiary. Additionally, they nominate a vesting age of 25 – this will ensure their grandchildren must wait until the age of 25 before cashing in or accessing the bond.

They invest in 50% Australian shares and 50% international shares to get strong growth over the next 20+ years. They want this money to be used wisely to help their grandchildren get ahead or repay their education costs.

By using investment bonds, they have provided an intergenerational legacy which will outlast them and give their family a head start in life.

Written by Chris Black, Director at Fortress Financial Solutions


We’d love to hear from you!  To see if you could benefit from an investment bond, please book online or contact us on 

Fortress Financial Solutions founder Chris Black is an award-winning financial planner based in Toowoomba who specialises in superannuation, investing, business succession, cash flow management, retirement planning and personal insurances (including life insurance, income protection, total permanent disability and trauma insurance).


Information on this site may be regarded as general advice. That is, your personal objectives, needs or financial situations were not taken into account when preparing this information. Accordingly, you should consider the appropriateness of any general advice we have given you, having regard to your own objectives, financial situation and needs before acting on it. Where the information relates to a particular financial product, you should obtain and consider the relevant product disclosure statement before making any decision to purchase that financial product.

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