Mr Deutsch gave an example of a single retiree named Anna, who has income consisting solely of a franked dividend of $20,000, franked at 30 per cent.

“Anna must include in her assessable income an amount of $28,571 (i.e. $20,000 + $20,000 x 3/7). As she has no deductions, her taxable income is also $28,571,” Mr Deutsch explained.

“The gross tax based on 2017/18 marginal rates is $1,970. Under Labor’s plan to deny excess franking credits, the $8,571 is offset against the gross tax of $1,970 such that the net tax payable is reduced to zero, with an excess of $6,601. However, that excess of $6,601 now currently refundable will, under Labor’s plan, be no longer refundable.”

While that aspect of the proposed policy and its impact is reasonably well understood, what has not been is that, even though the $6,601 will no longer be refunded under the Labor plan, the Medicare levy will continue to be calculated on the full taxable income of $28,571 rather than the lesser amount of $21,970 (being $28,571 minus $6,601), he explained.

“The Medicare levy would then be 2 per cent of $28,571 or $570 as opposed to a Medicare levy of $0 if based on taxable income of $21,970. That is because the Medicare levy for a single person not receiving the Senior Australian Pensioner Tax Offset (SAPTO) is 2 per cent of total taxable income if taxable income exceeds $27,476, but is NIL if taxable income is less than $21,980,” he said.

The $570 that has been charged is inappropriate, he said, as $6,601 has not been received either directly or by way of refund.

Other areas where all this might matter include the Private Health Insurance Rebate and the entitlement to the Commonwealth Seniors Health Card, he noted.

He assured SMSF professionals, however, that it would have no relevance to the age pension as shares are classed as financial assets and subject to a deeming rate irrespective of actual taxable income.