What are the most tax efficient investments for wealthier people? The best answers to that question have changed with rule changes in recent years. They will change again from July with the new taxes on large superannuation balances.

Returns on investments held in personal names are taxed at 39 per cent including Medicare Levy from $135,000 per annum and 47 per cent above $190,000 annually. Half of realised capital gains on investments held more for than a year pass tax free.

Super pensions are the most tax efficient structure with zero tax rate. However they are subject to a personal limit of $1.6 to $2 million. Also many people are unable to maximise their balances due to contribution and age limits. They may sell businesses or properties after age 75 for example.

Super balances above $2 million can stay in accumulation phase paying15 per cent tax on income and 10 per cent on realised capital gains. However the earnings on balances over $3 million will be taxed an extra 15 per cent from July for a total of 30 per cent.

Family discretionary trusts were a popular, tax-efficient option for wealthier people until a few years ago. The taxable income generated by money invested in the trust could be distributed selectively to family members who were in low tax brackets.

The beneficiary reported the tax liability and paid the tax but did not have to be paid the cash distribution. It could be retained in the trust for ongoing investment.

However around 2021 the Australian Tax Office changed its policy and now requires the cash to be paid to the low-income beneficiaries. That does not suit some investors. Family trusts are also of little use if there are no low-income family members.

Some people set up companies to hold their investments. These pay tax at a fixed 30 per cent on all earnings, including capital gains. They receive no CGT discount.

Insurance or investment bonds used to be a popular vehicle before the current super system was developed. Now they are regaining popularity. They pay tax at 30 per cent if held for ten years. They receive no CGT discount. However the manager can deduct capital losses against income, a valuable advantage.

Some bond managers make a special effort to reduce the net tax rate they pay by using franking credits and careful management of buy and sell transactions of their underlying assets as investors deposit and withdraw amounts. Some say their effective net tax rate is often below 20 per cent.  So the most tax efficient structure for well-off investors varies depending on personal circumstances. Individual planning is needed.