Investment bonds and education bonds share common features, such as tax-free access and taxation during investment. These bonds are taxed at a corporate rate of 30%, which is advantageous for investors in certain tax brackets.

Some education bonds have an additional perk – they qualify for education benefit claims. These claims allow investors to receive a refund on the tax paid by the bond issuer. For example, some education bonds are tax effective in that if you withdraw $10,000 for education expenses your investment only decreases by $7,000.

It's important to note that education bonds are eligible for tax benefits only when the withdrawals are used for education-related costs.

Investment and education bonds are taxed at the bond issuer level, up to a maximum of 30%, and you don't need to report the earnings on your income tax return.

Both investment and education bonds follow the 10-year tax rule. Earnings from these bonds held for over ten years are not individually taxed or assessed for capital gains.

Education bonds are not entirely tax-free; they are taxed based on the recipient's age and their marginal tax rate. Minors under 18 have a lower income threshold before paying taxes. To optimise tax benefits, many choose to wait until the recipient is over 18 before using the bond for education expenses.

Education bonds have a contribution cap known as the 125% rule. You can contribute up to 125% of the previous year's contributions to maintain tax advantages after ten years. Earnings are automatically reinvested.

After 10 years, you can withdraw bond earnings tax-free, but they must be used for educational purposes. This covers tuition fees, living allowances for studying away from home, boarding costs, books, and equipment. 

Education bonds are versatile, allowing investment in various asset classes, from equities to fixed income. Providers like IOOF, Futurity, Australian Unity, and AMP offer these bonds with different investment options. However, they tend to have higher management fees compared to direct investments. A 0.7% p.a. management fee can impact returns, so it's crucial to consider this in relation to tax advantages, especially if you're in a higher tax bracket. While fees are fixed, investment income isn't, making it essential to weigh potential savings against the certainty of fees.

Education bonds are like managed funds or ETFs with a tax advantage. However, they have restrictions on how you can use the funds. It's important to consider the recipient's future plans and tax implications. These bonds are ideal for investors with certainty about the recipient's education path and those in high tax brackets. Choose wisely, as fees can impact long-term tax benefits.