Austock imputation bond added to approved securities list for the macquarie margin loan
Austock Life announced that the Austock Imputation Bond has been added to Macquarie’s approved securities list for the Macquarie Margin Loan.
According to Austock Life, this brings another level of innovation to Imputation Bonds, which overlay an insurance bond tax treatment across a menu of some of Australia’s best wholesale managed funds.
Adding margin lending is the next step in the Bond’s evolution as Australia’s first tax-paid master fund.
According to Macquarie Investment Lending, Investors can benefit from gearing to build a large and better diversified portfolio.
They may also benefit from potential tax efficiencies where the margin loan funds are used for business or investment purposes, such as investing in shares or managed funds.
As Macquarie is a third party lender, Austock’s investment strategy to fully invest the Imputation Bond’s 19 options into specific managed funds is not impaired.
The Bond is an ideal security for margin lending as it is a non-distributing, capital growth investment.
An Imputation Bond can be structured as a stand-alone security, or a flexible component of Macquarie’s wider security package, including managed funds and shares acquired with the margin loan.
As the Bond’s investment structure is akin to a master fund, Macquarie has assigned separate LVRs (between 40% and 95%) to each of its 19 options, with a Bond’s overall credit limit determined by the investor’s menu selection.
Importantly, withdrawals and menu switching can also continue even while the margin loan is in place.
When Imputation Bonds and margin lending are combined, they open new financial planning applications for high net worth investors.
For instance, an Imputation Bond structured as a sinking fund to repay a margin loan, creates flexibility on how and when loan principal is repaid. The Bond can also play an obvious role as a reserve for margin calls.
Additionally, the combination of these two long term investment structures, can open new avenues for investments best suited to gearing and dividend imputation allocated via the margin lending facility, whilst the Imputation Bond is used to invest in income oriented investments.
Durations of both structures can be co-ordinated to specific objectives, such as financing children’s education, business succession funding, or simply as an accessible, wealth building alternative to superannuation.
New Imputation Bond business is nearing $50m and average lump sums are over $80,000.
Whilst financial advisor support has centred on estate planning, aged care strategies and education funding, new simplified superannuation opens an array of new applications.
Insurance bonds are the next best tax-paid investment framework to superannuation, and as such they can be a natural roll-over vehicle for drip-feeding into super under its new contribution caps.
Redundancies and golden handshakes are obvious here, because new super will end their ETP roller-over benefits.
In stark contrast to super’s blanket prohibition on gearing and using superannuation investments as security, margin lending secured by an Imputation Bond may give rise to tax deductible interest.
When loan funds are used to finance a contribution or investment in the Imputation Bond itself, interest on the borrowing is not deductible the Bond’s unit price gains are capital by nature.
This follows last week’s announcement of the Macquarie Treasury Fund being added to the Imputation Bond menu and a more than halving of ongoing fees to 0.5% p.a. for the Bond’s cornerstone cash option.
28-Jun-2007