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Investor Education > Managed Funds > Education Savings


An education savings plan is an investment product that is designed to be used for saving for the future education expenses of children. Educations savings plans or accounts are considered tax-effective as they are structured to take advantage of Government incentives for long-term saving for education, and operate as ‘scholarship plans’ under tax laws. As such they may offer tax advantages not generally available with normal investment products.

Tax advantages

An education savings plan is a tax paid investment, with tax on earnings paid at the fund manager level at a maximum rate of 30%. While the investment remains within the savings plan, it is not necessary for the investor to report earnings on their own annual tax return. Provided the proceeds of an education savings plan are used to fund eligible education expenses, generally no further tax is payable upon withdrawal. However education benefits, when paid, are assessable for tax to the nominated student and are treated as investment income for tax purposes. The tax implications for the student will vary depending on the age of the student and their personal circumstances.
Investors can usually withdraw money from an education savings accounts at any time, however penalty tax may be payable if the amounts withdrawn are not used for eligible education expenses. Penalty tax is generally applied at the investor’s marginal tax rate less an offset for the 30% tax paid at the fund manager level.

Eligible education expenses       

The proceeds of an education saving plan can generally be used to fund primary, secondary and tertiary education fees and expenses (including mature age students). This may include fees and related expenses for pre-school, school, university, TAFE and other registered organisations in Australia as well as overseas. Education expenses for children with intellectual, learning or physical disabilities are also eligible.
Making contributions

Almost anyone over the age of 16 can commence a saving plan for the education of a child they care for, or contribute money to an existing education savings plan. This includes parents, grandparents, uncles, aunts, guardians and godparents.

Contributions can be made by investors with an initial lump sum or a regular monthly savings plan. Where it is necessary to increase or decrease contributions due to changing personal circumstances, normally investors are able to do so without any fees or penalties. Total contributions up to a maximum of $365,000 per nominated child or student can be made, with this limit reviewed annually and increased to reflect rises in the costs of educating a child.

Important Update

As part of the 2011 Federal Budget, the Low Income Tax Offset was removed for minors. This meant students under the age of 18 will only have the ability to withdraw investment earnings up to $416 per year tax free. Students over the age of 18 was not affected. 

Insurance Bonds are another form of tax paid investments.  The earnings from insurance bonds do not need to be used for educational purposes as required with an education savings plan, however there is a minimum 10 year holding period for earnings to receive tax paid status. More information on insurance bonds.


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