Alphacentauri - you think Airservices "agreed" to SFIS, about which you are surprised. I took part in preliminary Zoom meetings with Airservices and can assure you that they invented it, CASA is simply their echo chamber when it comes to airspace. Various royal commissions into other aspects of government refer to this as "regulatory capture". I also totally agree with your comment about Airservices business model.
43 Inches - I agree that eventually "ATC" might devolve to separation based on "sense and avoid". However, I also believe that this concept is much further in the future than we are being led to believe by the driverless car industry and the driverless drone industry. The question I am posing is what do we do in the meantime?
The point of this thread is that ICAO provides rules and procedures that member nations have signed up to, they include the airspace categorisation. The Minister is allowing CASA and Airservices to ignore those rules and procedures and invent a hybrid which may or may not work. (I am also pretty sure the Minister would not understand the nuances) Airservices claims to have written a safety case around SFIS, but has refused to release the document. CASA OAR wrote a report about Mangalore which apparently decided SFIS would not work. I say apparently because the report was removed from the CASA web site almost as soon as it was posted. No doubt at the behest of Airservices. The very essence of a safety case is that it should be public (not to mention how a publicly owned government agency is allowed to have secrets!). So my only conclusion has to be that it contains conclusions that SFIS created either a Class A (unacceptable) or Class B (can only be accepted by a General Manager) risk that is being withheld from the flying public.
ICAO tells us that we can choose Class G, E or D (C, B and A are not necessary). In my opinion, a Class D Tower with enhanced low level surveillance would provide acceptable safety. You also assert that "Class D can not work in the Ballina area, it's way too complex to efficiently operate a tower there and blocking out airspace for CTA will then condense the VFR private traffic even further creating more risks for them." I'm not sure whether you are an air traffic controller or pilot, but I can assure you that I have seen Class D operations in far busier environments than Ballina, and they work just fine. ATC facilities need to be concentrated where they will have the most safety effect, statistically this will be around runways where there is "competition" for the airspace caused by speed and other performance differentials. Classically, a Control Tower resolves these issues by knowing pilot intentions, and aircraft performance, in order to ensure that pilots, IFR or VFR, are in the right place and the right order to operate the aerodrome safely and efficiently. The fact that other pilots may avoid the airspace only serves to remove flights from the terminal airspace that do not need to be there. This removes the "way too complex" you refer to and is in use all over the world.