“We want to make sure that these proposed changes don’t accidentally end up hurting the very people Labor says they want to help,” Mr Di Natale told Fairfax Media. “The Greens do have concerns about the possible unintended consequences these changes could have on struggling pensioners in particular and we’ll be looking at this proposal very closely to Loading Replay Replay video Play video Play video ensure that they are not worse off. “The Greens are going to be scrutinising this proposal very closely in the Senate to make sure that any proposed legislation doesn’t make inequality worse for struggling pensioners, and we will use our numbers in the senate to fix it.”

The tax policy throws a wild card into the vital election test between Labor candidate Ged Kearney and Greens challenger Alex Bhathal in the Melbourne seat of Batman this Saturday, with the two parties neck-and-neck in the polls. Loading One Greens source said the row over tax rules for older Australians could turn voters against Labor, helping the Greens in a contest where the Liberals are not running a candidate. Ms Bhathal said she knew some of the pensioners in the electorate were concerned about how Labor’s proposal would affect them. “We need to be doing everything in our power to tackle inequality, not make it worse,” she said. “One thing that pensioners can count on is that if they entrust me with their vote in the federal parliament, I’ll fight day and night to make sure that people who are struggling are looked after.”

The Greens made it clear they support reforms to close unfair rules that help the wealthy, but their stance suggests a Labor government would face vigorous scrutiny in the Senate to amend the new policy. Labor treasury spokesman Chris Bowen bluntly rejected government claims that the plan would hurt 610,000 Australians on “the lowest annual incomes” – a figure yet to be backed by any public analysis from Treasury. Mr Bowen told Fairfax Media that Treasurer Scott Morrison was using “taxable income” figures to give a misleading impression of the effects. “Scott Morrison is a one trick pony, he did it with negative gearing too, pulled out the taxable income data in an attempt to demonstrate Labor’s well targeted tax policies are an attack on the poor,” Mr Bowen said. “Taxable income data misses most of the income coming from tax-free, retirement-phase super that we’re discussing.”

The reform hits about 8 per cent of all Australian taxpayers but spares 92 per cent because the only change is to those who receive a cash refund to account for the franking credits on the dividends they receive. Labor estimated last night its reform affects 400,000 self-funded retirees as well as 200,000 people on the part-pension and about 15,000 on the full Age Pension. The change will also be felt by 200,000 self-managed super funds. Labor estimates the remaining 400,000 taxpayers are under the age of 65, including people with big share portfolios who may not work. Mr Shorten tried to calm the fears about the policy yesterday by insisting that pensioners and part-pensioners would be protected under the policy, as he faced questions on breakfast television. “What we’re proposing is if they’re not getting some extra taxpayer funded bonus for income tax they haven’t paid, their part-pension will increase,” he said.

“We will make sure that pensioners are OK, full stop.” But Labor offered no pledge yesterday on how that would happen or how much it would cost, leaving it without enough detail to counter the Greens concerns about pensioners. One concern among financial advisers is that major super funds would suffer lower returns from the policy, given it extends to large retail funds as well as the self-managed super funds Labor has emphasised in its public remarks. Shadford Financial Group adviser Phillip Gillard said big funds in the pension phase – the tax-free period in retirement – would not be able to use the cash refunds to shore up their returns. “I feel very confident that if Labor does not want to allow excess imputation credits to be refunded, then it will affect super pension fund members across the board,” he said.