Smarter ways to build beyond super

With super tax changes looming, high earners are reassessing how and where they structure their wealth.

This article is sponsored by Generation Life

Australians with larger superannuation balances are facing a new conceivable financial reality – and many are starting to question if their nest egg is still in the right place.

With the government determined to impose an additional tax on earnings on super balances over $3 million, there’s growing interest in how to restructure wealth more effectively. Although the changes are yet to become law, they represent one of the most significant shifts in superannuation in recent memory.

But what do these changes actually mean – and what are the options for those looking to protect and grow their retirement wealth?

Why the proposed changes matter

Under the proposed changes, Australians with superannuation balances above $3 million will be taxed an additional 15 per cent on notional earnings relating to the portion above that threshold. While this will only apply to a small proportion of the population, it has created a ripple effect – especially among high-income earners and those with growing portfolios.

“The issue isn’t just for those with more than $3 million in super now,” said CEO of Generation Life Felipe Araujo. “It’s for people who are on track to exceed that balance in the future – professionals, business owners, high-income earners. It’s important they’re thinking ahead.”

There’s also confusion around how earnings will be calculated, with unrealised gains (paper profits) potentially being taxed. This has raised further concerns about the fairness and transparency of the proposed changes.

Mr Araujo added: “Clients are concerned that they’ll be taxed on performance that hasn’t been realised yet. That’s something people are still trying to understand – and rightly so.”

Exploring your options

For those rethinking their retirement strategies using super, the good news is there are alternatives. Diversifying into other tax-effective investment vehicles can help manage the overall tax impact, improve access to funds, and reduce reliance on superannuation as the sole retirement strategy.

Founder and managing director of Family Wealth Advisory Michael Bova said clients are increasingly exploring alternative strategies. “They’re asking, ‘What other options are available to grow my wealth efficiently and sustainably?’ And they’re more open than ever to structures they may not have considered before – especially those that offer flexibility and long-term benefits, like investment bonds.”

Mr Bova noted that while tax considerations are becoming more prominent, they’re not the only factor driving decisions. “Clients aren’t making choices based on tax alone. They’re weighing performance, access, control, and legacy planning. But the proposed Division 296 changes have brought tax more sharply into focus, prompting people to think more strategically about how their investments are structured.”

These options include family trusts, companies and investment bonds – the latter gaining new attention as both a tax-effective and flexible solution.

Generation Life chief executive officer Felipe Araujo (left) and Family Wealth Advisory founder and managing director Michael Bova (right)

The role of investment bonds

Investment bonds aren’t new, but their relevance is growing. They offer a unique blend of tax efficiency, simplicity and accessibility that can appeal to high net worth and high earning Australians looking to diversify their wealth accumulation and wealth transfer strategies outside of super.

“An investment bond is a long-term investment structure that pays tax at a maximum rate of 30 per cent. Generation Life leads the way in driving the tax effectiveness of the structure, with the anticipated effective annual effective tax paid rate of some investment options ranging from 10 per cent to 15 per cent, which is significantly lower than the highest marginal tax rate of an individual,” said Mr Araujo.

“Investment Bonds provide flexibility and investment choice. Once held for more than 10 years, withdrawals attract significant tax benefits – proceeds are fully tax paid, requiring no declaration to the ATO. And unlike super, there’s no preservation age, so you can access funds at any time.”

This flexibility makes them attractive not only for retirement planning, but also for those looking to set up intergenerational wealth, save for education, or simply reduce taxable income.

Unlike property, which can be illiquid and carry overhead costs, or shares, which may require hands-on management, investment bonds offer a more streamlined alternative. Mr Bova explained: “There’s a level of simplicity. Once it’s set up, it’s relatively low maintenance – and for clients, that’s a huge plus.”

Another appeal is the ability to ‘take advantage of the 10-year clock’ through the 125 per cent rule, allowing investors to top up their bond annually without resetting the tax-free withdrawal period.

“Many people believe investment bonds are outdated,” said Mr Araujo. “But when you understand how they work – especially in a changing tax environment – they start to make a lot of sense.”

Mr Araujo also pointed out the growing interest in investment bonds not just from older Australians, but also among younger investors: “We’re seeing interest from younger clients– people in their 30s and 40s. That’s been a noticeable shift in recent years.”

Thinking beyond super

As the financial landscape continues to shift, wealth structuring is no longer a ‘set and forget’ task. Instead, it’s a dynamic process that benefits from forward planning, professional advice, and a willingness to consider newer or lesser-known strategies.

“There’s no one-size-fits-all approach,” said Mr Bova. “But the most important thing is that people are reviewing their portfolios, understanding the implications of the changes, and asking the right questions. That’s the starting point.”

Investment bonds won’t be the right solution for everyone. But for those wanting to diversify, potentially reduce tax exposure, and maintain control over their funds, they may offer a smarter, more flexible pathway.

Thousands of Australians could be affected by the proposed additional taxes on superannuation. Generation Life’s investment bonds provide an alternative option to restructure your wealth that could be a tax-effective solution. To learn more, contact Generation Life today.

Generation Life Limited (Generation Life) AFSL 225408 is the product issuer. The PDS and TMD at www.genlife.com.au should be considered in deciding whether the product is appropriate for you or to continue to hold the product, other than in relation to Generation Life’s product, information provided is factual information only and is not intended to imply any recommendation or opinion about superannuation products or superannuation investment.