Education Savings Strategies Australia: Smart Planning For Your Child’s Future
- Future Accounting
- Oct 13
- 4 min read
Written by: Melissa Cunliffe (CA)
Smart education savings strategies in Australia to maximise growth and minimise tax
Planning ahead for your child or grandchild’s future is one of the greatest gifts you can give. Whether you’re looking at school fees, university costs, or helping them achieve other milestones, understanding the right education savings strategies in Australia can make a big difference.
Below, we’ll explore the key options available to parents and grandparents, including how they can be structured to maximise tax efficiency, estate planning, and long-term growth.
Set clear goals for education and milestones
Before you choose an investment vehicle, ask yourself:
Is the goal to fund primary, secondary, university, or postgraduate education?
Do you want the funds to also support other milestones, such as a first home, business, travel, or wedding?
How many years do you have until the money is needed?
Who should own and control the investment – parent, grandparent, or a trust?
By answering these questions, you’ll be able to match the right strategy to your goals.
Investment bonds – tax effective and estate friendly
Investment bonds are a popular choice for families seeking education savings strategies in Australia, especially for high-income earners.
Key features:
Tax paid at 30% within the bond (often reduced with franking credits).
After 10 years, withdrawals are tax-free – no capital gains tax.
No impact on your personal tax return during the accumulation phase.
Can be owned by parents or grandparents, with children named as beneficiaries.
Why they work well:
High-income earners benefit from tax savings compared to the top marginal tax rate.
Wealth grows in a low-tax environment, compounding over time.
They can pass directly to a beneficiary, avoiding probate delays.
Education-specific investment accounts
Some providers offer education-focused funds that are structured specifically to pay school or university costs.
Advantages:
Regular payout options aligned with education years.
May include fee protection or life insurance add-ons.
Easy to use with education as the sole focus.
These are ideal if your priority is strictly education funding.
Family trusts – flexibility with more control
For high-net-worth families, a discretionary or family trust can be very effective.
Benefits:
Ability to distribute income flexibly to family members once they turn 18.
Strong estate planning control via trustee and appointor provisions.
Useful when there are multiple beneficiaries.
Drawbacks:
Distributions to minors under 18 are taxed at penalty rates.
Trusts can be complex and require professional management.
Direct shares and ETFs in custodial accounts
For families who prefer a low-cost, hands-on approach, direct shares or ETFs can work well.
Benefits:
Diversified, low-cost investing.
Flexible options aligned with your child’s time horizon.
Considerations:
Minors under 18 face high tax rates on income above $416 per year.
Assets may fall into your estate and be delayed by probate unless carefully structured.
Protecting your child’s future if something happens to you
It’s not just about saving – it’s also about safeguarding the funds.
Nomination of beneficiaries
Investment bonds allow you to nominate a child or grandchild as a beneficiary, ensuring funds transfer smoothly without probate delays.
Testamentary trusts
Set up through your will, these allow income distributed to minors to be taxed at adult rates – a significant benefit. They also provide asset protection in the event of divorce, bankruptcy, or mismanagement.
Life insurance and binding nominations
Life insurance ensures education costs are covered if something happens unexpectedly. Superannuation and insurance payouts can also be directed to beneficiaries through binding nominations, often bypassing probate.
Putting it all together: a sample strategy
Example: grandparents planning for a grandchild’s future education.
Open an investment bond in their name, nominating the grandchild as beneficiary.
Contribute $10,000 annually for 10 years.
Allow the funds to grow in a tax-paid environment.
After 10 years, withdrawals are completely tax-free.
On passing, the investment automatically transfers to the grandchild, avoiding estate delays.
Final tips for parents and grandparents
Review ownership structures and beneficiary nominations regularly.
Combine strategies: use investment bonds for tax efficiency, testamentary trusts for estate planning, and ETFs for diversification.
Consider the impact of tax, estate law, and Centrelink where relevant.
Don’t underestimate the importance of life insurance in protecting your plans.
At Future Accounting, we work in with your preferred financial planner to assist in determining the overall most suitable strategy for your needs. Our team can help you create a personalised plan that grows with your family’s needs. Contact us today to book an appointment and start securing your child’s future with confidence.
Disclaimer
This article does not constitute financial advice and is for general information only. It does not take into account any individual’s personal objectives, situation or needs, and is not intended as professional advice. Any similarity to an individual’s personal circumstances and the examples provided in this article is purely coincidental. Any person acting upon such information without receiving specific advice, does so entirely at their own risk.
Authorisation under an Australian Financial Services Licence (AFSL) is not required in the provision of this article and the author plus Future Accounting Group Pty Ltd is not acting in its capacity as an Australian Financial Services Licence holder
Liability limited by a scheme approved under professional standards legislation.
