Ged Kearney, the party's candidate in Saturday's Batman byelection, softened Labor's position, telling disgruntled voters on Thursday she was hearing what they were saying. "All I can say is that we will look at it - we have got time, we have got time," she said at a campaign stop. Ms Kearney is trailing the Greens in an electorate where one in five voters are over the age of 65. The byelection is seen as a trial ground for the next full federal poll, which must take place before mid-May next year. On Wednesday, Mr Shorten said the "part-pension will increase" for voters "not getting some extra taxpayer funded bonus for income tax they haven't paid," but members of his own economic team were forced to clarify their leaders comments the next day. Bill Shorten in Melbourne and Labor’s candidate for Batman, Ged Kearney Credit: Joe Armao

Labor's finance spokesman Jim Chalmers confirmed there would be no direct supplement for pensioners who miss out. "Some people would see a change to their part pension," he said. "It's true that not all will." Treasurer Scott Morrison said the Labor policy was a "train wreck". "They don’t know where they are on this measure because they didn’t think it through," he said. Labor sources confirmed that rather than a pension top-up scheme, it will look at a "mitigation strategy" that will see the extra $59 billion in revenue invested in personal income tax cuts and health initiatives, while those who lose money will have their income reassessed under a pension assets test that could see their payments increase.

The managing director of the Self-Managed Independent Super Fund Association, Michael Lorrimer, said he would be seeking meetings with Labor and Treasury. He said the "essential practical reality" was that investors would only have a few weeks to decide how to structure their finances if Labor wins the election next year. Treasurer Scott Morrison "The whole package is alarming for us," he said. "We are not telling anyone to rush out and do anything just yet." Labor frontbencher Ed Husic said he could understand "that there are some people who are going to be uptight."

"But that is always going to be the case when you announce a policy like this," he told Sky News. Former prime minister Paul Keating and the Grattan Institute have called the reforms equitable, but the leader of Prime Minister Malcolm Turnbull's review of tax and dividend imputation said Labor's proposal further undermined an imperfect system. Professor Henry Ergas said the effects will be greatest on people who have some dividend income but are not the highest bracket of earners as they have a variety of different income sources. Economist Henry Ergas Credit:Nic Walker "Putting aside that it is economically terribly inefficient, it will have a lot of collateral damage to people who are basically small savers and investors," he told Fairfax Media from New York.

"They won't account for a large share of the revenue gain that will occur but it will affect them personally and potentially significantly." Loading Professor Ergas said older people who have already paid decades of tax would be punished. "When you make changes for young people they have lots of margin for adjustment they can find a new job or seek new income," he said. "By the time you get to 80 you have a very low margin for adjustment. There is a very little they can do to offset that loss and they feel it very directly."