Development Bonds Aid Tax Savings

Press, Volume CVII, Issue 31440, 5 August 1967, Page 8

Development Bonds Aid Tax Savings

The Inland Revenue Department has emphasised the value of investing in development bonds to make substantial savings on income tax.

The department says that the maximum tax saving is 30 per cent or 30c to the dollar of the amount invested. This saving is tax free and the bonds do not bear interest The main points about the bonds are that they will be issued for a limited period; investment may be in multiples of $lO to a maximum of $2OOO for any one investor in a year ending March 31; they are not transferable; they are redeemable at par after six years from the date of issue; earlier redemption is possible at specified discount rates in cases of death, bankruptcy, hardship or other special circumstances. By comparison the tax saving spread over the term of the investment equals a rate of interest of between 5} per cent and 6J per cent after tax.

To an investor paying at the maximum income tax rates the return is equivalent

to between 17| per cent to 181 per cent before tax. The differences in rates of effective yield are mainly caused by the period between investment and tax saving. Local tax offices are ready to see that investors get the early benefit of the tax savings. Taxpayers who pay provisional tax and buy bonds before September 7 can reduce their provisional tax payment by one-third of the tax saving then. The other two-thirds can be taken off the March instalment.

Salaried taxpayers who buy bonds may get a special code certificate from the local tax office. This will allow the employer to reduce the normal P.A.Y.E. tax so that the investor gets the full benefit of the tax saving by March 31, 1968.