“Treating the increase in the value of an asset as taxable income is, by any measure, a radical departure from existing tax principles and a crude method of addressing super wealth and wealth inequality,” he said.

“It will give rise to many unintended consequences which we do not believe have been properly considered.”

Burgess said those impacted by the proposed tax, including individuals, small business operators and primary producers, will encounter liquidity stress compounded by the erratic and unpredictable nature of a tax that is linked to market movements.

“The assertion that a ‘commercial yield’ should always generate sufficient liquidity for the fund to cover a tax that is linked to movements in the underlying asset value, lacks commercial realism, particularly in rural Australia,” he said.

“SMSFs have historically been a strong source of venture capital. This is very unlikely to continue in an environment where unrealised capital gains are subject to tax.”

Further, he claimed that under the proposed manufactured calculation of earnings, complex adjustments will be needed to ensure earnings are not inflated or artificially reduced.

“A system of carried-forward tax losses will apply along with tax debt accounts for defined benefit funds. Some funds with defined benefit interests face additional valuation and pension reporting obligations,” he said.

“When the government first began floating the idea and need for this measure, reference was made to the small number of individuals with superannuation balances exceeding $50 million and $100 million. We agree that balances of this size are outside the original policy intent, but they are a consequence of historical policy settings.”

He continued that the existing policy framework is designed to address these balances and as a result, they are being progressively removed from the superannuation system.

“Despite the original stated objective of this policy, the proposed threshold has been struck at a considerably lower level. The shift from $100 million to $3 million, and a measure of earnings that captures unrealised capital gains, utterly reframe the policy position from one that targets ultra-high-net-wealth individuals to one that starts to capture elements of middle Australia, small business owners and farmers,” he said.

“It has very different policy intentions and outcomes. The lack of indexation of the threshold will, over time, see this measure impact many more average Australians.”