Anthony Albanese’s decision to resurrect Division 296 – the levy that taxes super balances above $3 million on their unrealised gains – sounds tidy in a press release. Treasury claims it will touch ‘only 80,000 wealthy accounts’ and raise $2 billion in the first year without lifting headline tax rates. Yet the moment you translate the policy from spreadsheet to street, it becomes the most corrosive change to Australia’s savings system since the 1985 CGT. It taxes money that may never exist, forces fire-sales, and ultimately exports both capital and talent.

Picture a 58-year-old wheat farmer who spent three decades ploughing every spare dollar back into land and machinery. In a wet bumper year the valuer marks his property up by $800,000. Under Labor’s formula he owes roughly $120 000 in tax – cash he doesn’t hold because grain prices have slumped and his silo is half-empty. He can borrow (at 8 per cent), flog a tractor, or carve off a paddock in the middle of planting season. Each option dumps new supply onto a thin market and drags down valuations for every neighbour – precisely the chain reaction regional advocates warned about when the scheme first surfaced.

Now swap the paddock for private equity. A Brisbane med-tech start-up closes a late-stage funding round that values its shares 30 per cent higher than last year. The founders – on paper – are suddenly ‘rich’, so the taxman calls. Twelve months later Nasdaq tanks and the share price halves, but the ATO keeps the cheque. No automatic refund, no carry-back. It is not a levy on income; it is a levy on volatility. Rational founders will move their cap table to Delaware before the next valuation spike, and the intellectual property goes with them.

Treasury’s own long-range estimate assumes the tax will haul in $7 billion a year by 2034, yet the model ignores behavioural second-order effects. When you tax phantom gains, investors dump lumpy, thinly traded assets first – farms, start-ups, small-cap miners – because those assets create the biggest year-to-year paper swings. That fire-sale impulse seeds oversupply in exactly the sectors that drive productivity. Capital does not sit around waiting to be clipped; it walks. Italy’s 2011 ‘Robin Hood’ levy triggered a rapid outflow of infrastructure holdings to Luxembourg. New Zealand’s deemed-rate experiment was watered down within two Budgets after capital fled across the Tasman. Australia risks replaying both stories at ten times the scale.

The flight will not stop at dollars. Silicon Valley already hoovers up Australian software engineers and data scientists on O-1 visas. Hand them one more reason – confiscatory tax on money they have not yet earned – and the queue through LAX lengthens. Once talent departs, so does the next generation of high-growth companies, and the future tax base with it.

Proponents insist the threshold hits only the super-rich, but the $3 million cap is not indexed. A 30-year-old professional earning $140,000 and salary-sacrificing the maximum concessional limit will breach it well before retirement if nominal returns average six per cent. Industry modelling released this month shows more than 10 per cent of current workers in their 30s will be captured long before they collect the Age Pension. Bracket creep is policy, not accident, and within a decade the levy will reach precisely the STEM middle class Australia cannot afford to lose.

Even the consultation process is contested. The SMSF Association flatly rejects Treasurer Jim Chalmers’ claim of ‘heaps of consultation’, calling the measure ‘complex, costly and administratively impossible’. When the peak body representing 600,000 self-managed funds says the paperwork cannot be done, Canberra should listen.

Defenders reach for Joe Biden’s ‘Billionaire Minimum Tax’ as precedent, neglecting to mention the White House expects multi-year litigation over its constitutionality. They ignore the fact that advanced economies tax realised income because the alternative is unworkable. Even socialist France abandoned its net-wealth tax once it discovered that high-net-worth residents were decamping to Belgium and Switzerland in droves.

There are cleaner levers if the government genuinely wants larger balances to contribute more: cut the non-concessional cap, tighten the transfer-balance limit, restore the 10-year averaging rule for capital-gains discounts. Each option taxes realised income at the moment cash is created and preserves the foundational principle that you do not pay the tax man until you have the cash in hand.

Australia’s superannuation system was designed to turn lifetime earnings into patient domestic capital. The Albanese plan reverses that logic. It punishes lumpy, long-duration assets, distorts normal investment cycles, and signals to the world that Canberra will change the rules mid-game whenever it needs revenue. That is how you turn a country of owners into a country of renters.

For a centre-right movement serious about growth, the response must be unequivocal: pledge to repeal Division 296 in full and legislate that no Australian will ever be taxed on paper profits. Because nothing erodes prosperity faster than a government that demands money which does not exist – and then wonders why the money, and the people who earn it, disappear.