“Why the impact on non-resident investors is considered a higher priority than the impact on self-funded retirees is hard to fathom,” said Reece Agland, head of superannuation at Taxpayers Australia.

“The best way to reduce the negative impact for foreign investors would be to reduce the corporate tax rate, which will have the impact of reducing the benefit of imputation credits without getting rid of them altogether.”

“We hope the government understands the benefits of the imputation system before venturing down the potentially dangerous path of removing it.”

Mr Agland also believes the discussion paper paints a “bleak picture” “of the dividend imputation system and understates the positives.

“In an environment of low interest rates, investors — particularly self-funded retirees — have turned to Australian shares that offer good income from dividends and franking credits that may be refunded in a SMSF,” Mr Agland said.

“Remove dividend imputations and two things will happen: Some Australian companies will reduce the return to investors and the incomes of retirees will fall.”