All age pensioners would be exempted from Labor’s plan to terminate franking credit refunds should it gain government in 2019.

The amendment of the initial policy, which was made public two weeks ago and budgeted to raise $59 billion over a decade, was just recently cleared by the shadow cabinet.

The reversal comes in the wake of extensive criticism that the policy did not take consider the impact it would have on retirees with low incomes.

Labor Leader, Bill Shorten, has pledged to exclude 306,000 pensioners, comprised of 277,000 older Australians on full or part pensions and 29,000 on Disability Support Pensions, from carer payments, parenting payment, Newstart and sickness allowances.

Labor says the adjusted policy would gather $55.7 billion and keep 94% of the revenue while taking away a quarter of the Australians initially affected by the policy. The financial burden would now be on the shoulders of 893,000 individuals and self-managed superannuation funds (SMSF), with 200,000 SMSFs the prime target.

The new terms have been ‘grandfathered’ to free up any SMSF with at least one pensioner or allowance recipient before 28 March. The deadline is looking to prevent pensioners from setting up SMSFs or some SMSFs signing up a pensioner to acquire an exemption.

“Self-managed superannuation funds with at least one pensioner or allowance recipient before 28 March 2018 will also be exempt from the changes,” said the Labor leader.

“This means that every pensioner will still be able to benefit from cash refunds.”

The chief executive of the Council on the Ageing, Ian Yates, said in a report that he discussed the matter with Labor for two weeks in order to get a fair deal for pensioners.

“A purist policy would include pensioners but that’s not the real world – and it’s not where the money is, anyway. If you’re a full or part pensioner, you’re not rich,” Yates remarked.

How do cash refunds work?

Dividend imputation was started by the Hawke-Keating Labor government in 1987 to prevent so-called double taxation of company profits. This essentially meant that shareholders no longer needed to pay tax on their dividends, for which the company had already paid tax.

But in 2000, the Howard-Costello Coalition government changed the policy, making it more liberal for SMSFs and self-funded retirees.