“There is quite a broad-ranging level of understanding and concern about what the government is proposing to do. People do understand that compounding returns for decades can produce quite spectacular results. And with that key element of a lack of indexation ... they just don't move.”

Evans continued that this element of the proposed tax is in the minds of the community in general, even young people, and is eroding their trust and ability to make a commitment to invest for the long term.

“When I talk to young people in particular about capturing the tax advantages of things like catch-up concessional contributions and tell them it makes sense to do it for their tax, they argue they are making a long-term commitment but the government is announcing changes that they can see will potentially impact them in the future,” he said.

“It does impact their confidence to make the decision to put that money into superannuation, and to reduce their taxable income for that financial year. It’s quite extraordinary.

“In the past I would have conversations [with this age bracket] about how they would need money for school fees or to upgrade their house, so they would need money outside of super to do that, but now it’s about their concern over the regulatory side of their superannuation.”

Evans said he is now talking strategies with clients, especially those with SMSFs, around ensuring that any assets they may have can generate enough liquidity to pay for any potential Division 296 tax bill.

“They don't want the cash flow pressure of those tax bills coming through in any year. They do have the option of paying the bill through their super, from whatever income that particular asset may generate through leasing or rent, but that is also assuming there is a continued desire to hold that asset within superannuation.”

“If we do some modelling, for example, and they have the option to transfer the ownership out of the super fund, either for full or partial consideration, and if they've met a condition of release, then those are some options that we look at in terms of what would they be better off with? That's bespoke and specific to every client.”

With the legislation likely to be passed, he said, it is now about planning for the potential need to come up with cash to pay extra tax and weighing up whether moving an asset outside of super is more viable.