More than 200,000 pensioners would lose money under Labor's plan to abolish cash refunds for some shareholders, shadow treasurer Chris Bowen has said.
The Opposition wants to save more than $5 billion a year through overhauling Australia's system of franking credits.
Currently, shareholders can receive these credits when being paid a dividend.
The credits are equivalent to the amount of tax paid by the company before distributing profits to shareholders.
If the taxpayer does not have any tax to pay, and has excess credits, they can convert the extra credits into a cash refund from the tax office.
Speaking on 7.30, Mr Bowen said the crackdown would affect about 200,000 part pensioners and around 14,000 full pensioners.
"You're looking at about 10 per cent of part pensioners, and, at most, 1 per cent of full pensioners," he said.
"And in most cases, it will be very modest."
Mr Bowen insisted the "vast majority of the benefit here goes to high-income earners".
He said about a third of Australia's 600,000 self-managed superannuation funds would be impacted.
Earlier on Tuesday, Treasurer Scott Morrison said the policy amounted to "stealing the tax refund of retirees and pensioners and low-income earners".
Mr Morrison described it as "a brutal and cruel blow for retirees".
"It violates terribly the simple principle that if you've paid tax on something, you shouldn't have to pay it twice," he said.
"The Government should give that tax back to you, if [a company] has already had tax paid on it."
But Mr Bowen said the cash refunds amounted to "negative income tax".
"I say to everybody that reform is difficult, but we are going to the next election being very up front with our plans," he said.
