“Included in this measure of earnings are unrealised gains which means some taxpayers will pay tax on unrealised capital gains – a first for the Australian tax system,” he said.

“While the Association doesn’t support super members with excessively large balances receiving generous super tax concessions, taxing unrealised gains is not the answer.

“It will give rise to many unintended consequences, defies long-standing principles of our tax system, and will result in outcomes inconsistent with the stated objective of this new tax.

“The stated objective of clawing back tax concessions afforded to high-wealth superannuants is to reduce the revenue lost due to existing concessions.

“It shouldn’t be to impose a new tax which, for some, will not only claw back those concessions but result in more tax being paid than would have been the case if there were no concessions.

“For example, there will be scenarios where the inclusion of unrealised capital gains results in taxpayers paying an implicit rate of tax on taxable super earnings exceeding the highest marginal tax rate.”

Mr Burgess said the tragedy of the government persisting with this approach to tax unrealised capital gains is that it could be easily avoided and still achieve its stated objective.

“All that’s required is to simply remove unrealised capital gains from the calculation of earnings and use actual allocated taxable earnings as the measure of earnings,” he said.

“It would avoid the many unintended consequences and bizarre outcomes that will arise by combining two entirely different concepts of taxable income for the same entity.

“It would also avoid the complexities associated with having to exclude certain withdrawal and contribution transactions from the calculation of earnings and avoid the proposed convoluted system of carried forward negative earnings.

“Members of super funds that cannot or choose not to report actual taxable earnings for a member would have their Division 296 liability assessed by using a notional earning rate. This simple adjustment will remove the anomalies and ensure this new tax is consistent with its stated objective.”

Mr Burgess said while there were some wins for the industry in the draft legislation in terms of the adjustments made to the definition of TSB and the definition of a withdrawal and contribution for the purposes of this new tax, those adjustments have stopped short of what the sector was hoping for.

“The failure to exclude disability insurance benefits from an individual’s TSB in the same manner as compensation payments, and the add-back of amounts withdrawn as disability benefits or under a release authority for the payment of super related taxes are glaring examples,” he said.

“These are all issues we would like to raise with the Government and Treasury, but the short two-week consultation period, which means the legislation is likely to be introduced into Parliament before the end of this calendar year, will make that difficult.”