The starting rates of return are different because the SMSF in pension mode gets a greater rate of return because of its refundable franking credits.

For retirees deriving their only assessable income from shares in their own name – that is, outside superannuation – in the abovementioned scenario, the rate of return drops from 5.21 per cent to 3.89 per cent.

But somebody receiving a pension from a fund regulated by the Australian Prudential Regulation Authority – that is, the large industry funds and bank-owned retail funds – would receive an unchanged rate of return of 5.71 per cent.

Mr Molesworth said there was no change for the last investor because pooled super funds had so many members still paying tax that they could make full use of all franking credits.

On the other hand, an SMSF with one or two members only had only so many tax liabilities to offset.

And in pension phase, an SMSF has no tax liabilities to offset, so non-refundable franking credits become worthless.

Under the existing dividend imputation system, shareholders receive a credit for the tax paid by the company in which they have invested.


But when shareholders do not pay tax, such as super funds in pension mode, they receive the "excess" credits as a cash refund under the current rules.

For a self-managed super fund in pension mode, the after-tax rate of return would drop from 5.71 per cent at present to 4 per cent, BDO tax partner Mark Molesworth said. Supplied

If elected, Labor would continue to allow credits to be claimed against other taxable income, but abolish the refunds.

"For exactly the same person with exactly the same superannuation balances invested in exactly the same portfolio, the effective rate of return to that person who had started a super pension in a large APRA-regulated fund will be higher than for the person who has their SMSF," Mr Molesworth said.

However, there were other reasons somebody might want to have an SMSF, principally greater control over one's affairs, he added.

While Labor has positioned the change as another assault on the rich, the Turnbull government is emphasising the fallout for low-income earners.

Mr Molesworth said it was important to distinguish between retirees drawing a tax-free pension from their super and a set of older Australians for whom compulsory super never existed.

These people invested in shares to fund their retirement and now derive their only income from dividends, he said.