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Bonds

What are Bonds?

Bonds are fixed-income investments issued by governments, financial institutions, and companies to raise capital. In return for investing, bondholders typically receive regular interest payments and the return of their principal investment at a specified maturity date, subject to the issuer’s ability to meet its obligations.

Key Components of a Bond

Principal (Face Value or Par Value)
The amount invested in the bond, which is generally repaid to the investor when the bond reaches maturity.

Coupon Rate
The fixed or variable interest rate paid by the issuer to the investor, typically distributed at regular intervals.

Maturity Date
The date on which the bond expires and the issuer repays the principal amount to the investor.

Compliance & Tax Considerations

SMSF Trustees must ensure that bond investments align with the Fund’s written investment strategy, are made on an arm’s length basis, and are reported at market value. Interest income received from bonds is assessable income for the SMSF. Profits or losses arising from the disposal or redemption of bonds are generally treated as ordinary income or deductions, not capital gains or losses, in accordance with ATO guidelines for traditional securities. You are not entitled to claim a deduction for a loss you made on the disposal or redemption of a bond that is a traditional security to the extent that the loss is a capital loss or is of a capital nature.

Types of Bonds

SMSFs can access a wide range of Bond investments, including:

  • Government Bonds
  • Investment Grade Corporate Bonds
  • Fixed Rate Notes
  • Floating Rate Notes (FRNs)
  • Inflation-Linked Bonds
  • High Yield Bonds

Trading Bonds

  1. Sale Price May Differ from Face Value:
    • Market value depends on interest rates, credit risk, maturity, and demand
    • Bonds trade on the secondary market
  2. Capital Gain or Loss:
    • Gain or loss treated as ordinary income or deduction for SMSF purposes
  3. Interest Already Earned:
    • SMSF may receive accrued interest, or it may be factored into sale price

How can an SMSFs invest in Bonds?

  • Managed Income Portfolio Service – Companies such as FIIIG Securities provide a professional portfolio management team to assist SMSF investors in deciding which corporate bonds your fund should include in its portfolio.
  • Australian Securities Exchange (ASX) – Purchase exchange-traded Australian Government and eligible corporate bonds through a share broker, similar to buying shares.
  • Exchange Traded Funds (ETFs) and Managed Funds – Invest in diversified fixed-income portfolios through a single investment, often with lower minimum investment amounts.
  • Licensed Fixed-Income Brokers – Purchase corporate or government bonds directly through licensed brokers, providing access to a broad range of bonds that may not be available on the ASX.

If you would like to engage with an agent for your Bond Investments you can contact FIIIG Securities

FIIG Securities

FIIG Securities is one of Australia’s leading fixed income providers, supporting SMSF investors with:

  • Access to institutional-grade bonds not typically available on retail platforms
  • Transparent pricing with efficient trade execution
  • FIIG Services over 3000 SMSFs
  • Independent credit research and market commentary to support informed investment decisions
  • Ongoing support in building income-focused portfolios

To enquire more reach out directly here.