“The government’s approach to calculating the tax liability under the Better Targeted Superannuation Concessions measure balances simplicity of design with equity by leveraging existing fund reporting requirements,” it said in an exclusive interview with SMSF Adviser.

“It treats individuals equally in applying a tax on large balances, whether they have an SMSF or are invested in an APRA-regulated fund.

“The alternative approach of reporting actual taxable earnings would require significant changes in reporting by APRA-regulated funds that would come at a cost to all their members, not just those with high balances.

“Finally, in addition to the recent consultation process on the implementation details of the measure, the government intends to undertake further detailed consultation on draft legislation in the second half of 2023.”

SMSF Association CEO Peter Burgess said in response there is nothing simple or equitable about the government’s proposed approach.

“The concept of an adjusted total super balance, which will be necessary to ensure earnings are not inflated, doesn’t sound like a simple or efficient approach to me,” he said.

“And taxing unrealised gains, which appears to be unfortunate consequence of the proposed approach, is hardly equitable and is hardly sector neutral when you consider the exposure that many SMSFs have to illiquid investments such as real property.

“We understand the difficulties that many APRA funds would face in having to report actual taxable earnings attributable to each member but why should the SMSF sector, which will be mostly impacted by this new tax, be penalised for this?

“All we are asking is that those funds that are able to report actual taxable member earnings be given the opportunity to do so with a deemed earning rate applied as the default approach for others. This, in our view, is the simplest and most equitable approach.

“In our experience, substantive changes are unlikely once draft legislation has been released.

“Hence our push to re-open the consultation now ahead of any draft legislation being released.”