“The lack of indexation is out of step with current accepted tax principles, with most other elements of our super system being indexed from contribution limits to the transfer balance cap and lump sum benefits,” she said,

“Leaving the cap at $3 million without indexing it will mean people in my generation will have an entirely different and relatively higher threshold to that of my children, with the real value of the threshold likely falling to $2 million due to inflation by around 2040.”

Tink continued that many individuals and stakeholders across this country broadly support the intent and principle of the bill to rein back generous tax breaks for super balances that are beyond what is currently deemed necessary to fund comfortable retirement.

“However, in its current form and without indexation, this legislation leaves many deeply concerned. The large superannuation balance threshold should be indexed to keep pace with inflation, to avoid bracket creep and to ensure greater intergenerational fairness,” she added.

“This amendment does just that. It is sensible, it is simple, it is practical, and it is in line with current taxation law.”

Assistant Treasurer Stephen Jones replied the government won't be supporting the amendment.

“For a matter of context, the average balance on retirement today is somewhere between $150,000 and $200,000 - that's a long way south of the $3 million threshold that has been set in the bill before the house, and it's for that reason that we're confident that less than 0.5 per cent of all fund members will be caught by the new provision,” he said.

“We don't see any significant shift in that in the near term. It is, of course, the norm within the taxation system that we do not index tax thresholds. The previous government didn't index the division 293 tax threshold. It is, of course, open to a future government to decide to lift the threshold, and a future government would make that decision in the context of all of the other fiscal pressures that are bearing upon a government at that point in time.”

Peter Burgess, SMSF Association CEO, said the vote was disappointing but not unexpected.

“The government has the numbers in the lower house and we always expected it to be [voted down],” he said.

“There is still a bit to play out in the lower house. It is still being debated. There are other amendments from other parties. The opposition is asking for the removal of Schedules 1-3. If it is passed it then has to get through the Senate, and we hope that it may be defeated there.”