Independent schooling can cost up to about $400,000 per child, paid from after tax income. Felix Taing and Affluens' senior financial planner Aaron Phuong unpack a wealth management strategy for Australian doctors: investment bonds, where earnings are taxed at a maximum of 30% and withdrawals are tax paid after ten years. They cover the 125% contribution rule, the education bond's extra benefit and its catch, projections for a one year old, and the question every parent needs answered first: when does the ten year clock need to start?

Key Takeaways

• Put a Number on It: Independent schooling can run to about $400,000 per child across 13 years, paid from after tax income. A figure that size deserves a plan rather than a hope.
• A Bond Is a Tax Wrapper: Earnings inside an investment bond are taxed at a maximum of 30%, against a 47% marginal rate. After ten years, withdrawals come out tax paid, with no capital gains tax to settle.
• The Education Bond Has a Catch: An education bond is an investment bond with an extra 30% tax benefit on money used for education. What comes out is taxed in the child's name, so the child's age matters and your accountant belongs in the conversation.
• Mind the 125% Rule: Each year you can contribute up to 125% of what you put in the year before. Scale contributions down and the cap resets from the lower figure, which slows how quickly you can build back up.
• Work Backwards From the First Fee: The ten year clock should finish when the money is first needed. For private high school that means starting around your child's first birthday; for primary school, possibly before they are born.
• The Plan Moves With Your Family: You can nominate a transfer to your child at a set age, redirect the balance to yourself, or open further bonds as savings allow. A selective school offer or a change of heart does not strand the money.

Notable Quotes

1. "So essentially it's a way to invest and save tax." — Aaron Phuong
2. "But it's really flexible in that you can change the rules anytime. Just the same way you can can update your will at any point in time and say change where your assets go." — Aaron Phuong
3. "So the question, the answer to that is it depends when you're going to need the money." — Aaron Phuong
4. "So it's a fully taxpaid after ten years and that's the main attraction." — Aaron Phuong
5. "you've actually got to start before they're even born, right? Because the wait list is that long." — Felix Taing
6. "So it's flexible which is great because you know what they might actually make it to that selective school" — Felix Taing