View our presentation on how an investment bond can help you grow your clients’ wealth and be a complement to superannuation, presented by National Strategy Manager, Greg Bird.

1. Presented by Greg Bird, 18 May 2017

2. This material has been prepared for financial advisers only. It is not
intended that it be presented to or used by retail investors.
The Lifeplan Investment Bond is issued by Lifeplan Australia
Friendly Society Limited (Lifeplan) ABN 78 087 649 492 AFSL
237989.
The information contained in this presentation does not take into
account the specific investment objectives, financial situation or
needs of any particular investor.
It is recommended that appropriate and independent professional
advice be obtained before making any decision based on the
information presented. Please refer to the current Product
Disclosure Statement (PDS) for product details available at
australianunity.com.au/wealth
We do not give tax or legal advice. The information contained in
this presentation is based on our interpretation and general
understanding of the relevant tax, life insurance and other
laws/guidelines applicable at the time of its production.
The application of tax laws depends on the investor’s
circumstances. Tax law and estate planning can be both complex
and different in their application to individual circumstances.
Advisers should seek their own taxation and legal advice.
Examples are based on certain assumptions detailed at each
example and current laws and guidelines. Changes to any of these
would change the outcomes and no guarantees are provided that
outcomes noted will be achieved.
Important information
RETIREMENT FUNDING2
© Property of the Australian Unity Group, all rights reserved. Not
to be reproduced without permission.

3. What is an Investment Bond?
RETIREMENT FUNDING3
Company distributions
Trust distributions
*Source: ato.gov.au
Individual
MTR
0-45%*
Investment
Bonds
Super Account
Based Pensions
0-15%30%maximum
15%maximum

4. Tax structures: How they compare
4

5. The opportunity…

6. • The objective of Superannuation is being redefined – in LAW
• TTR not as tax effective for some members as it used to be
• $1.6m cap on funds transferred to tax free pension account
• $25,000 annual concessional contribution cap for all
• $100,000 annual non-concessional contribution cap
• Super contributions threshold reduced to $250,000 (additional 15% tax)
• Royal Assent 29 November 2016 - implementation July 2017
• Removal of anti-detriment provisions – more on this later…
But wait - will there be further change?
From 1 July 2017*
6 *Source: http://budget.gov.au/2016-17/content/glossies/tax_super/html/

7. The writing has been on the wall…article
7

8. 8

9. Other advocates
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10. The opportunity for true transition to retirement
Concern
• Superannuation caps and lifetime limits?
• Age misaligned with Superannuation
rules: too old or too young
• Retirement on YOUR terms
• Choice of retirement date vs preservation
age/condition of release
• Work/life balance – “more time to stop and
smell the roses”
Consider
• Investment bond to build wealth to
complement superannuation or to
commence a concessionally taxed income
stream
Outcome
• Tax efficient income; reduced ATI
and associated levies
• Peripheral entitlements maximised
or retained
• Bankruptcy protection and Estate
planning opportunities
10

11. Case Studies

12. LIFEPLAN RETIREMENT FUNDING12
• 52, was self employed for 12 years.
• Recently sold business and now full time
employed earning $100,000 annually.
• CGT small business concessions contributed to
Super under S152D of ITAA1997.
• Surplus of $500,000 currently parked in several
term deposits.
• Mike invests his $500,000 in a Lifeplan
Investment Bond, plus $20,000 surplus income
annually.
• Aims to retire at 60 (2025) but wishes to retain
access to funds if he chooses to retire earlier.
• Mike needs to withdraw up to $600,000 upon
retirement to clear an outstanding investment
loan.
Case Study 1: Mike (Investment Bond TTTR)
Key Benefit
Until a withdrawal is made, the earnings within the
investment bond are quarantined from Mike’s taxable
income.

13. How it works: Mike’s taxable income – 2025 at age 60
Investment bond components
(IT2346)
Taxable income from bond
Rebates and offsets received
Net income after tax
Source: Lifeplan Investment Bond calculator 2017
Bond Value 2025 (age 60)
Bond balance start of year 974,161
Existing Bond - Balance at beg of Year 1 -
New Bond - Initial Contribution -
New Bond - Additional Contributions in Year 1 -
New Bond - Additional Contributions Year 2 + 20,000
0 -
Earnings (after tax) 55,160
Balance before drawdown 1,049,321
Annual Drawdown -
Ad hoc Drawdowns 600,000
Total Drawdowns 600,000
End of Year Bond Balance 449,321
Tax
Relevant amount of drawdown 211,177
Taxable amount of drawdown 140,771
Other taxable income (includes franking credits) -
Taxable super pension/annuity -
Taxable income 140,771
Primary Tax (excludes Medicare Levy) 39,717
Non refunadable tax offsets/rebates
Friendly Society Inv Bond Rebate 42,231
Low Income Rebate -
Super pension or annuity tax offset -
SAPTO for single taxpayer -
SAPTO for married taxpayer -
SAPTO for married taxpayer separated due to illness -
Other tax offsets -
Refundable tax offsets/rebates
Franking tax offset -
Tax Payable/(Refundable) -
Income (after tax) 140,771
Non-Taxable Portion of Drawdown 459,229
Tax-free Pension/Annuity (60yrs +) -
After Tax Cashflow 600,000
13

14. Case Study 2: Julia (Investment Bond TTTR)
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Two strategy options
1. Making $300,000 non-concessional contributions into
superannuation utilising her bring forward provisions.
2. Contributing $300,000 into a Lifeplan Investment Bond
and commencing a regular income stream of $15,000
annually, whilst salary sacrificing an additional $15,500
into superannuation to take Julia to her concessional
superannuation cap of $25,000.
• Julia is 50, single and recently inherited $300,000.
• Salary of $100,000 p.a. plus SGC.
• Inheritance held in Online Investment Account.
• Julia is worried about constantly changing
superannuation rules and losing access.
• She also has concerns around a challenge to any of her
future estate assets, particularly from her ex husband

15. Julia: Investment Bond TTTR
Let us consider how the outcome could be enhanced if Julia utilised the Lifeplan Investment Bond
strategy for these funds.
Current Traditional Strategy Think Different!
$300,000 Online account
@ 2.75% p.a.
$300,000 Non-Concessional
Contribution to superannuation*
$300,000 Lifeplan Investment Bond
income stream of $15,000 p.a., plus
super sal-sac of $15,500pa
Salary $100,000 $100,000 $84,500
TD Income $8,250 Nil Nil
Inv Bond Income Nil Nil $15,000
Assessable Inv Bond Income Nil Nil $795
Gross Income EOY1 $108,250 $100,000 $99,500
Taxable Income $108,250 $100,000 $85,295 (refer ATO IT2346)
Less Tax payable EOY1 $27,685 $24,632 $19,268
Plus Inv Bond rebate Nil Nil $239
Less Medicare Levy $2,165 $2,000 $1,706
Net Income EOY1 $78,400 $73,368 $78,765
MTR 37% MTR 37% MTR 32.5% MTR
Assumptions: ATO 2016-2017 Australian resident tax rates; ATO IT2346 Investment Bond Income assessment; Growth Client risk profile gross return of 8.00%;
Superannuation Fund earning rate of 6.80%; Investment Bond earning rate of 5.60% net of taxes and fees invested within a multi manager Growth fund.
*Revised superannuation rules apply from 1 July 2017
15

16. Julia: Investment Bond TTTR
• Under present legislation, Julia’s
superannuation balance would be tax free
to withdraw once a condition of release has
been satisfied as her preservation age has
been reached.
• As the investment bond has now reached
its 10th anniversary, its total proceeds could
also be withdrawn tax free and without any
further assessment.
• Most importantly, Julia has retained access to
the Investment Bond at all times and met her
goal of maintaining flexibility and liquidity.
• Additionally, she has lowered her annual
taxable income and MCL, protected the funds
from bankruptcy, as well as streamlining and
simplifying her Estate Planning needs.
Fast-forward 10 years, at age 60, and the
projected outcome would look like this:
Superannuation balance: $301,445
Investment Bond balance: $323,285
Total $624,730
16

17. A tax effective regular income stream sourced
from an investment bond may add value for
clients seeking regular income as well as retention
of supplementary benefits such as:
• Seniors Health Care Card
• Family Tax Benefit Parts A and B
• Private Health Insurance Rebate
• Low Income Tax Offset invested
• Senior Australian and Pensioner
Tax Offset
• Low Income Superannuation
Contribution Refund
• Super Co-contribution
• Super Spouse Contribution rebate
Additional levies or surcharges, for example
the Medicare Levy, can also be reduced by
minimising the client’s Adjusted Taxable Income
(ATI) within an investment bond strategy.
How does an investment bond help with ATI?
The annual earnings of an investment bond are
excluded from ATI calculations while funds
remain.
Should a withdrawal occur in the first 10 years,
only the taxable component of the withdrawal will
be included in an ATI calculation. Any taxable
component of the withdrawal also qualifies for a
30% tax rebate.
Investment Bond TTTR
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Source: www.ato.gov.au

18. • Funds held within Investment bonds are not
preserved, unlike superannuation where a
preservation age and condition of release must
be met prior to withdrawal.
• Up until the policy’s 10th anniversary,
Investment bond income streams consist of a
“non-assessable” amount which is not
taxable, and the earnings component which is
taxable, but qualifies for a 30% tax investment
bond rebate. Once an investment bond reaches
its 10th anniversary, any income streams or
withdrawals are non-taxable in the hands of the
policy owner.
• There are no contribution caps, nor any
personal CGT consequences for withdrawing
funds or switching fund options, as would occur
with traditional unitised managed funds.
• Investment Bonds have existed in an
environment were very little regulatory or
legislative change has occurred over the last 30
years, unlike superannuation which is tinkered
with on a regular basis.
• Estate planning – the investment bond can be
structured to sit outside the control of the Will,
avoiding lengthy Probate delays.
Investment Bond TTTR
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How does an investment bond strategy help with retirement planning?
Source: www.ato.gov.au

19. 19
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Investment Bonds can be structured to be a non-estate asset.
Remember:
INSURANCE CONTRACTS ACT 1984 – SECT 48A
Policy for the benefit of third party beneficiary
(1) The following paragraphs have effect in relation to a contract of life insurance to the extent
that the contract expressed for the benefit of a third party beneficiary (who may be the life
insured):
(a) The third party beneficiary has a right to recover from the insurer any money that
becomes payable under the contract even though the third party beneficiary is not a
party to the contract;
(b) If the third party beneficiary is not the life insured, any money paid to the third party
beneficiary under the contract does not form part of the estate of the life insured.

20. • Tax office definition of dependant vs the
Superannuation definition of dependant.
The ATO definition of a dependant is a spouse
of any age plus children up to age 18.
• In the instance where a Superannuation death
benefit is paid to adult children, the taxable
component is taxed at 15% plus Medicare Levy
of 2%
• Removal of anti detriment provisions. This
will reduce the death benefit payable to
beneficiaries and/or the estate of the deceased
member.
• There may come a time when it is appropriate
to liquidate and commutate the SMSF, or
likewise with a retail super fund in order to
minimise the future tax liability to non-
dependant beneficiaries. An investment bond
may be a suitable alternative structure at this
point in time.
• Estate planning – Superannuation and
investment bonds can be structured as a non-
estate asset to avoid Probate delays and the
risk of challenge. Unlike Superannuation,
death benefits from Investment Bonds are paid
out tax free to ALL beneficiaries – irrespective
of whether they are dependant or non-
dependant.
Removal of anti-detriment provisions
20
Why is it important to manage superannuation death benefits?
Source: www.ato.gov.au

21. The value of advice; a quick case study:
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• SMSF established in 1997
Current Value 2017 Purchase Value
Property $1.0m $0.5m
Shares $0.6m $0.35m
Total $1.6m $0.85m
• No tax free component

22. The scenario: To cash out super or not?
22
•Sole SMSF member – recently widowed:
– Aged 83
– Rapidly failing health
•Beneficiaries of super death benefit are his non-dependant adult
children.
•Assumptions and estimated annual returns net of taxes/fees:
– Super 7.5% (tax free within pension phase)
– Investment bond 5.2% (capped at max 30%)
– Drawing minimum ABP pension Current year - $112,000pa

23. Comparative outcome – EOY1
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Cash out to Inv Bond Retain SMSF/ACB
Opening Balance $1,600,000 $1,600,000
Plus: Growth @ 5.25% $84,000 @ 7.5% $120,000
Less: Drawing/Pension $112,000 $112,000
Closing Balance $1,572,000 $1,608,000
Less:Tax on Death Nil $265,320
Distributable Balance $1,572,000 $1,342,680
• Strategic advice advantage = $229,320 or 17%
• $229,320 / $36,000 = 6.37 years break-even point

24. Change our thinking

25. Other strategies

26. Concern
• Where to invest surplus annual income?
• Paying down debt dilutes the interest
cost deductibility
• Investing surplus funds potentially
increases taxable income
• How to eventually repay debt without
CGT consequences
Consider
• Invest surplus income within Investment
Bond to quarantine earnings from ATI
Outcome
• ATI is further reduced as investment
earnings
are quarantined within Bond
• Tax deductibility of gearing strategy
maximised
• Tax free Investment Bond lump sum after
10 years can be used to repay debt
• Reduced or Nil CGT as investment asset
may not need to be sold – in part or full
Strategy 1: Maximised Gearing efficiency
26
26

27. Concern
• Substantial cash holdings within
Family Trusts
• Adult members with incomes in excess
of $37,000
• Trust income must be distributed but
not
needed by members.
• Who want to have greater control over
distributions from the Trust
• Complexity
Consider
• Investment Bond held within the
Discretionary/Family Trust
Outcome
• Tax efficient income
• Reduced tax and levies
• Entitlements maximised
Strategy 2: The tax efficient Family Trust
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28. Concern
• Provide a gift to a young child at a future
date
– Legal capacity of the child
– Protect from other family members
– Minimise potential tax when gift
occurs
– Premature death of the owner.
Consider
• An Investment Bond under child
advancement rules
– Invested and owned by an adult
– Ownership transfers (vests) when
child reaches a nominated age
Outcome
• Held in ‘Trust’ for the child
– Protected for benefit of child
– Legal capacity passes to child
– Vests without any tax
consequences.
– Client is assured the child will
receive the gift.
Strategy 3: Child Bonds
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29. Concern
• Maintain lifestyle
• Minimise potential tax on death to
non dependant beneficiaries
Consider
• Controlled sale of SMSF assets within
zero tax environment
• Funds can be transferred over time
• No tax payable on death
Outcome
• Sale value optimised
• Tax efficient income continues
• Capital access maintained
Strategy 4: Estate planning and Super Death Benefits
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30. Concern
• Average age of first home buyer is 38*
• Where to build wealth to be used as a
house deposit over med-long term.
• Time horizon suitable for GROWTH risk
profile vs CGT consequences at time of
later wdl.
• Low MTR at commencement of strategy vs
High MTR at time of wdl (CGT
consequences?)
Consider
• Investment Bond to build home loan
deposit funds
• * ING sourced data 2015
Outcome
• Withdrawals after 10 years are non
assessable for tax
• Withdrawals pre 10 years are
concessionally taxed with rebate
• No CGT consequences for investor
• Investment income not added to ATI:
– FTB A & B
– HECS
– HELP
Strategy 5: Accumulating a home loan deposit
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31. Resources
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32. Further information:
investmentbonds@australianunity.com.au
32

34. Think different.
Partner with specialised businesses that improve your access to knowledge and innovation.
Contact
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Name Area Phone Email
Derek Emery Head of Distribution 0438 509 838 demery@australianunity.com.au
Greg Bird National Business Development Manager 0400 401 676 gbird@australianunity.com.au
Colin Falls Business Development Manager NSW/ACT 0434 338 278 cfalls@australianunity.com.au
James Torrens Business Development Manager NSW/ACT 0422 414 614 jtorrens@australianunity.com.au
Ron Grima Business Development Manager QLD 0408 954 906 rgrima@australianunity.com.au
Ryan Francis Business Development Manager WA/NT 0417 812 958 rfrancis@australianunity.com.au
Paul Bugg Business Development Manager VIC/TAS 0448 458 456 pbugg@australianunity.com.au
Michelle Kaminski Business Development Manager SA 0429 301 828 mkaminski@australianunity.com.au

35. Thank you.
www.australianunity.com.au/2017-super-changes