Intra-cavity diffraction in VCSELs is a loss mechanism that potentially can cause a significant decrease in efficiency and a rise in the threshold current, particularly in cavities with small lateral features with a high index contrast. One such VCSEL type is the 2.3 microm GaSb-based buried tunnel junction (BTJ) VCSEL studied in this work, where the BTJ induced topology of the top layers gives rise to excess loss through diffraction. Diffraction loss is difficult to measure, and also the numerical estimation must be done with care because of the non-axial propagation of the diffracted fields. We present a simulation method with spatially varying dimensionality, such that the field is three-dimensional (3D) in the entire cavity, whereas the material structure of the cavity is modelled in 3D near the BTJ and the layers with a varying topology, but elsewhere is assumed to be 1D like in a regular DBR structure. We find that the diffraction loss displays a non-monotonic behaviour as a function of the BTJ diameter, but as expected it rapidly increases below a certain diameter of the BTJ and may even become the dominant cause of loss in some device designs. We also show that the diffraction loss can be much reduced if the layers above the BTJ can be deposited such that the surface profile becomes smoother with increasing distance from the BTJ.