Instead of working with key stakeholders to devise a workable framework to tax individuals with high super balances more, the government has instead focussed its intent on pushing through a framework that adds complexity, is inequitable and will result in unintended outcomes.

What is not in question is the right of the government to reduce the concessionary tax benefits for those in the fortuitous situation of having a high balance. These impacted superannuates have done nothing wrong other than taking advantage of more generous contribution rules that are no longer available. Good design principles of equity, simplicity and efficiency should still apply irrespective of how many taxpayers might be impacted.

The complex design features of the proposed policy will add considerable cost to administer the whole super system and create uncertainty that will discourage many from making additional contributions towards their retirement.

We also question how much net revenue will be raised from this measure as some individuals who have met a condition of release may move some of their super fund assets into alternative structures.

One of the centrepiece design aspects of the policy involves taxing unrealised gains, which is likely to cause cash flow concerns for several funds and sets a dangerous precedent for our taxation and super systems.

Volatility around asset values can fluctuate wildly from year to year, which can result in little similarity between the actual gain made when realised versus any tax paid whilst the asset was held based on the movements in its unrealised value over time.

There is a good reason why this established principle is adhered to: it follows the money. In most cases when assets are realised there are proceeds to deal with any resulting tax liability. What makes the proposed policy even more flawed is that there is no automatic refund of tax paid when the unrealised amount turns negative.

If you are thinking it is starting to sound like a casino where the odds are stacked against you, you are right. Taxing unrealised gains without allowing for timely recognition of losses other than allowing negative super earnings to be carried forward, is inequitable.

This is particularly important as there are many instances where carried forward losses may never be able to be utilised. Taxpayers should be able to utilise their current year’s losses to the extent they have paid Division 296 tax in a prior income year.

We must be realistic and acknowledge that any new superannuation tax would have been challenging, given that it needed to navigate a maze of existing complexities and different types of funds, namely SMSFs, APRA funds and defined benefits schemes, or even worse a combination thereof.

Sector neutrality is a good objective however the proposed framework does not fit well for SMSFs with illiquid assets and even more so for defined benefits schemes. Unintended consequences would be difficult to avoid given that there is no one-size-fits-all to cater for all super fund types.

What is being targeted is predominantly a legacy issue as it would be difficult to accumulate a balance over $ 3 million with current restrictions on contribution caps introduced back in 2007. These high-balance accounts held by older Australians will reduce over the coming years as people pass away and these death benefits exit the system.

Changing the law and applying the change on a retrospective basis will effectively penalise individuals who adhered to the rules that existed at the time. It will treat other forms of retirement savings such as home ownership unequally.

Imagine if the government tried to tax unrealised gains of homeownership. Defined benefit members will also be impacted without the ability to plan around it. Appearing before the Committee, Michael Black KC, representing retired judges, indicated that there would be a constitutional legal challenge to the proposed tax change.

This would create an interesting scenario where High Court judges may be asked to decide a case directly linked to their own benefit. The Australian Council of Public Sector Retirees Organisations says its members should not come under the new tax so there is no shortage of individuals wanting to be excluded.

A two-week consultation period after the initial announcement was a clear sign that the government was not interested in seriously considering other alternatives. Appearing before the Senate of Economics Legislation Committee, I and many other representatives outlined the serious concerns in the proposed framework which fell on deaf ears.

The feeling I got from the committee was that those taxed to the extra impost only represent a small percentage of the population, so if the proposed law is inequitable or complex so be it. Whilst individuals who have amassed a super balance over $3 million should consider themselves fortunate, it should not be acceptable that proper tax law design around efficiency, fairness and equity should be ignored because this cohort only represents .05 per cent of the population.

All new tax measures need to be appropriately designed and implemented to achieve the intended policy objective within the principles of good law design. Sadly, this point never got off the ground.

Defined benefit interest has been carved into very complicated regulations. The regulation will determine the notional cash value of their interest. This illustrates that this proposed methodology is like trying to get the square peg into the round hole.

It will require people with special skills in defined benefits to ensure the calculation of the notional defined benefit value for the Better Targeted Superannuation Concessions measure is properly calculated.

There is already enough complexity in our superannuation system and adding poorly designed law makes little sense when there are many alternatives to achieve the same result, which is to reduce the concessionary benefits that superannuation provides for wealthier Australians.

Given that only 80,000 individuals are immediately impacted, there seems to be little sympathy opposing these inherently unfair measures to calculate this additional impost.