“This means that those people who have structured settlement contributions because of workplace injury, are going to have much smaller superannuation balances when you’re trying to work out whether they’re eligible or whether they qualify,” he said.

“Now, you take the same set of circumstances for someone who doesn’t get a structured settlement payment but they get a TPD payout from their insurer, and are unable to work because of their injury or their illness, and they will get a credit in the first year for the contract but there’ll be no adjustment obviously for TSB.

“So, if we have someone who is unable to work, let’s put a number on it, someone who’s 45 years of age, and gets a large insurance payout and that money sitting in super, they’ll get a credit for one year.

“If that money is then utilised to pay out a disability, superannuation income stream benefit and then the TSB is above $3 million because they had some accumulation money in the fund as well, then they’re going to be leveraged with this tax.

“We see an equity issue there between the source of funding for someone with a disability, and that’s an inequity that’s existed ever since the concept of total super balance was introduced.”

Mr Miller said during the consultations with Treasury of which he was a part, the issue was raised as well with pensions, particularly as to whether a reversionary pension or a death benefit income stream will be a credit that again exists for the recipient of the pension.

“On a positive note, the liability will ultimately die with the member in the sense that if you have an unpaid member balance at 30 June but you passed away prior to 30 June, it does mean that there won’t be any assessment made for that year,” he said.

“So, death will effectively trump the measure. However, whilst the credit is in existence for year one, what won’t be in existence is a transfer of the capital earnings losses.”

He said the issue of TSB also has different rules subjected to it compared to when entering into a limited recourse borrowing arrangement, which in some instances counts towards the TSB.

“We’re saying Treasury shouldn’t be including the value of a limited recourse borrowing arrangement in the calculation for total superannuation balance for the purposes of this $3 million cap,” he said.

“There’s a lot of elements there, and we can contemplate the use of reserves inside funds, and one of the overhanging issues from years gone by which is legacy pensions and how they’re going to be treated.”