I was an investment
banker in Sydney during the 1990s and one of the salary “packaging”
lurks available to almost everyone from professional staff up was the
opportunity in buy infrastructure bonds, which had the most amazing
convoluted structure but came with rock solid third party tax advice
that the effect was to give an instant 5-9% pay rise. ATO gave them the
green light.

Keating Government introduced them to stimulate infrastructure
investment, but they were comprehensively rorted by sharp high-income
earners, especially after Macquarie Bank broke all records by issuing
more than $1 billion of them to fund its Transurban tollroad in

Basically, you put about $30,000 of your own money
(my employer lent this to me) in for every $500,000 of IBs purchased,
so you had NONE of your own hard-earned out-the-door and then all but
about $25,000 of your salary would also go into the IB black box, as
well as tax deductible loans and the like.

Out the other end of
the black box, and deposited into your bank account monthly, would be
“interest” paid on the bonds, which in straight dollars terms was about
5-9% more than your normal after-tax salary. One’s “salary” after the
IB scheme (ie what appeared on your Group Certificate) was reduced to
about $25,000 per annum which also had other certain benefits, such as
family payment entitlements.

No-one I knew really understood how
they worked but after the first lot were sold to the more financially
adventurous and didn’t explode, the word got about that it was the best
“packaging” deal going – and was it ever! There was great competition
for them in subsequent issues. The big boys got a lot, but there was
plenty for the “ordinary” professional staff as well.

Some of the junior guys in the M&A group with salaries of about $90,000 could say they owned $2 million of bonds!

Macquarie Bank bought the “assets” of Bankers Trust Investment Bank in
1999 and the BTers got retrenched, it triggered an automatic buy-back
clause of the IBs by the bank. Reliable word from inside MacBank at the
time was that the IBs was one of the FIRST assets on the shopping list
and the right to buy the IBs went straight to the executive floor and
were never seen again….

CRIKEY: Keep those tips for questions and issues to raise at tomorrow’s Macquarie Bank AGM in Sydney coming through to [email protected].

Peter Fray

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Peter Fray
Editor-in-chief of Crikey