Some investors will no longer get cash refunds at tax time if Labor wins the election, as Bill Shorten promises to close a $5 billion-a-year loophole.
In a speech in Sydney on Tuesday, the Labor leader will announce plans to wind back Howard-era reforms allowing investors to claim tax imputations from dividends.
Mr Shorten says the scheme was introduced under Paul Keating to make sure company profits weren't taxed twice - once with corporate tax, and again with personal income tax.
But changes under John Howard in 2000 allowed investors to get a cash refund from the government if their tax imputation was more than the tax they owed.
"If nothing is done, this subsidy alone will cost the budget $8 billion every single year," Mr Shorten will say in his speech.
"Reforming the system to eliminate this concession will save the budget $11.4 billion over the final two years of the current forward estimates, and $59 billion over the medium term."
Mr Shorten says the change will only affect a very small number of shareholders, who currently have no tax liability and use their imputation credits to get a cash refund.
"A small number of people will no longer receive a cash refund - but they will not be paying any additional tax," he says.
Labor says Australia is the only developed country in the world with a fully refundable imputation credit scheme.
Self-managed super funds are a major beneficiary of the scheme, with some funds getting cash refunds of more than $2.5 million a year.
"Every dollar allocated to tidy little arrangements for people who already have millions of dollars, is a dollar that can't be used to repair the budget and bring Australia back to surplus," Mr Shorten says.
The policy would apply from July 1 next year under a Labor government, and only affect future earnings from that year.
Shareholders who may be affected will have the ability to adjust their investment decisions to limit any impact from this policy.
Charities and not-for-profit institutions, such as universities, will be exempt from these changes.
The Parliamentary Budget Office estimates the policy will impact just eight per cent of taxpayers, including about 200,000 self-managed super funds.
