As many as 2.6 million people in large superannuation funds will be affected by Labor’s franking credit changes, the Financial Services Council says.

If elected, Labor will make excess franking credits non-refundable, denying some retirees a cash refund at tax time.

While anger over the policy has emanated largely from those with self-managed super funds and some observers have claimed that non-SMSFs will not suffer, the FSC claims more people in large regular funds will be affected than any other group.

“In 2015-16, refunds were worth $235 million to large super funds, with 50 funds receiving refunds,” the FSC says in a submission to a parliamentary inquiry examining Labor’s proposal.

“The average refund was $4.7 million per fund. There were 2.6 million accounts in these funds, so up to 2.6 million Australians benefited from refunds in these funds.” Refunds were larger in 2014-15 at $3.5 million.

The FSC, which represents retail funds such as those owned by the Big Four banks, asked 14 member funds to provide information about franking credit refunds.

Respondents identified 66,000 accounts owned by retirees and average benefits for those members of $850 a year.

Approximately 33,000 accounts benefited from refunds worth more than 30 basis points, or 0.3 per cent, each.

“For a typical full-time worker, an increase in yearly super returns of 0.3 per cent over a 46-year working life would boost retirement savings by 6.6 per cent, or $55,000,” the FSC says in a submission to a parliamentary inquiry examining Labor’s proposal.

People with low balances are among those who will be worse off.

“There are 73,000 member accounts in surveyed funds where the average member balance is below $100,000.” the submission says.

“The average benefit of franking credit refunds across all members of these funds is 26 basis points, which is 0.26 per cent or $195 per member.”

A spokesman for the shadow treasurer Chris Bowen said Labor’s policy would have little or no impact on the super of most Australians.

“The reforms are good for the budget and remove a concession delivered in very different economic times,” he said.

Under Labor’s proposed changes to dividend imputation, investors will still be able to use franking credits to offset their tax bills.

But people on low and zero rates of tax – principally those who fund their retirement using a share portfolio and or have an SMSF  – will no longer get cash refunds.

Labor says the change will hit the wealthiest retirees to increase government revenue by $10 billion in the first two years of operation.

Writing previously in The Australian Financial Review, Mr Bowen said Labor was sticking by its policy in spite of noisy, partisan detractors such as fund manger Geoff Wilson.

“Labor will return dividend imputation to its original design, as envisaged by Paul Keating. Australia is the only country in the world which provides a refund for corporate tax paid to shareholders if they don’t pay income tax,” he wrote.

“It’s a $5 billion-a-year anomaly that must be fixed in the interest of budget responsibility.”

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