How to avoid financial stress with education bonds

Educating your kids without financial stress by using tax free education bonds is the key.

Let me explain how this works and why this creates a stress and tax free opportunity at the time when your financial commitments are at their peek.

Financially planning and preparing for any stage of life is important and one of the most stressful stages of life that can put the most strain on our finances is the years while we are educating our children. So, we want to explain how you can avoid financial stress through that time with tax free education bonds.

💡 The impact of the cost of education on our household finances can be extremely stressful as time goes on if you are not prepared. And, in order to provide quality education to your children, parents often will go without: for example, buying things for themselves, sacrificing family holidays and even struggling to pay bills.

Our own education is as important as our children’s and grandchildren’s so, we want to show you how you can have tax free benefits with education bonds and educate your kids without the financial stress that provides peace of mind for you and your family.

So, here is a way to save yourself from ever increasing education expenses, and to also save your kids from future hecs debt. This can be one of the greatest gifts you can give your kids and grandkids, and receive tax advantages at the same time.

Today’s students predictions

One in two will obtain a university degree.
Expected to have 18 jobs over six careers in their lifetime.
90% of GEN alpha, born 2010 to 2024 are predicted to complete high school compared to 80% today.

Costs of education

FACTS as at 2023

Three in ten Australian parents are extremely or very stressed about the costs involved with their children’s education. The cost of education in Australia is doubling the rate of inflation especially for private school fees.

Current costs

– Private education costs $300,000+

– Religious education costs approximately $185,000.

– Public education approximately $90,000

⚠️ This is alarming and as costs in everyday life continue to rise, saving yourself future financial stress is more important than ever.

Solution

Unlocking valuable inter-generational wealth.

Inter-generational wealth transfer with education bonds can be set up so that it has tax free and tax deduction benefits, if you set up an education fund correctly.

It can be done in a variety of ways and can be done by you and or your parents, both of which will receive significant tax benefits. This does require some planning for how it will work best for your situation and can involve lump sum contributions, future activated transfers, asset protection from creditors, tax-free access and tax- paid investing.

Who is involved?

Education bond guardian, bond owners, bond beneficiaries (your children) and the bond representative.

The 5 BIG BENEFITS OF EDUCATION BONDS

1. EDUCATION BONDS ARE UNIQUE TAX-ADVANTAGED INVESTMENT PRODUCTS

Designed to help meet the cost of lifelong education. They have unique ‘bonus’ features that enable use for other life events. Think of an Education Bond operating like an education-purposed ‘Family Trust’ that can be used to accumulate and distribute wealth with unique tax advantages when distributed to Education Beneficiary(ies).

2. THE BOND OWNWER(S) HAVE FULL CONTROL

Of whether it is used for education purposes or flexibly used for other personal use.

3. A WIDE RANGE OF EDUCATION EXPENSES COVERED

Ranging from pre-school right through to adult education. Courses can be

Australian or international courses, including full-time, part-time, and a whole range of other ways of studying. You can also claim education expenses such as travel, cost of living away from home, uniforms, textbooks, electrical devices, and much more.

4. EDUCATION BONDS ARE TAX-PAID INVESTMENTS

Rather than you paying the tax on the earnings.

5. TAX FREE

Withdrawals from capital for any purpose are tax-free at any time.

And withdrawals made for education purposes from the earnings component of the Bond are tax-free if planned correctly.

CASE STUDY 1: Elizabeth

.

– Wealth transfer

Elizabeth is in her early 80s, is wealthy with some health issues, has $450,000 to help with grand children’s education and future deposit for a home.
Three grand children, ages two, five and eight.
Wants to help fund secondary Catholic education at total education cost estimate of $280,000 + tertiary at $40,000 each.
Does not need income but may like access some cash for personal use or medical expenses in the future.
Has control to pass to her son knowing she may have a short life expectancy.
Marginal tax rate is 25%..

– Key point –
Elizabeth before death, has tax free access to capital and can add more beneficiaries.

CASE STUDY 2:

A COUPLE LOOKING TO SAVE FOR THE FUTURE COST OF EDUCATION FOR THEIR FAMILY

James and Julie have one child Mia, aged 3, and plan to have a second child.
They intend sending their children to government primary school and catholic secondary school.
Based on current school fees, this will cost $130,000 per child.
They would also like to relocate overseas for a couple of years.
Julie is self-employed and James is a salaried worker.
They are both on a marginal tax rate of 30%.
They have $10,000 to invest as a lump sum and can afford $250 per month as a savings plan

HOW CAN AN EDUCATION BOND HELP:

James and Julie can set up a regular saving plan and apply an escalation rate so that their contributions keep up with inflation.
Mia’s grandparents (or any other family or friends) can contribute to the Education Bond, which will help secure education funding and provide for other significant life events.
James and Julie can utilize the valuable Education Tax Benefit whenever they make Education Benefit claims, which amounts to an additional $30 for every $70 withdrawn from the earnings component.

BENEFITS OF EDUCATION BONDS

❇️ If they move overseas for a period time, they can still make Education Benefit Claims as Australian or international Education Expenses are eligible.

❇️ Education Bonds can have valuable tax rate ‘arbitrage’ benefits for Bond Owners on middle to high Marginal Tax Rates. This is because Effective Fund tax rates (that the Education Bond company you are with pays) on the Bond’s Investment Options are generally lower than the ongoing personal MTRs.

❇️ As James and Julie’s lives change, Education Bonds are flexible and can adapt to their changing needs and objectives. For example, they can add children to the Bond, fund their own education expenses, or withdraw money for other family needs such as a holiday.

❇️Education Bonds provide asset protection from creditors and as Julie is self-employed, this may provide additional peace of mind.

If you need more information on education bonds or help to implement an education bonds strategy, contact us today on 08 7111 0022 or book a chat to see how we can best help you here

Arthur Panagis
Author, Founder, Wealth Coach and Financial Strategist

B.Bus (Accountant)
Grad Dip (Financial Planning)
Professional Certificate in Self Managed Super Funds
ASX Listed Equities Accreditation
Tax (financial) Advisor

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Disclaimer: This article is factual information only. It is not intended to imply any recommendation about any financial product(s) or to constitute tax advice. The information in the article is reliable at the time of distribution, but may not be complete or accurate in the future.