Labor, despite having been the first political party to call for the refunds back in 1998, now believes the payments are way too costly and weighted in favour of rich tax avoiders who are profiting at the public's expense.

It says it can save up to $5.6 billion a year by scrapping the refunds and has promised to redistribute that money as tax cuts for low and middle income earners.

The refunds, which make up about one sixth of the $30 billion-a-year cost of the dividend imputation scheme under which investors are compensated for the tax already paid on franked dividends, are paid to people with little or no taxable income.

The rationale is they do not receive the full benefit of the dividend imputation scheme as they cannot claim credits against tax they have already paid.

Labor's proposals have been dismissed by the Coalition, which voted to adopt the refund policy in 1999, as class warfare.

The Government and the Opposition are currently engaged in a heated argument over who will be hit hardest if Labor wins the next election and the proposed changes take effect.

Fairfax Media understands up to 250,000 part pensioners would have their effective incomes cut if this was to occur.

This could then open the door for them to claim additional pension payments, an exercise that could wipe out any economic benefit from the original decision.

Labor argues the economic impact on many of the current recipients of axing the refunds would be minimal. It says the bulk of the money goes to wealthy investors who have written down their incomes in order to minimise their tax liability.

The Australia Institute says almost half the benefits of dividend imputation overall go to individuals earning more than $180,000 a year.

The Coalition, on the other hand, is saying ageing self-funded retirees on low incomes would be hurt the most and that Labor's position punishes people who have done the right thing by investing for their retirement.

It knows first hand this is a financially astute, politically active, and easily agitated group thanks to the blow back from its own attempt to introduce superannuation changes in 2016.

The very real risk for Bill Shorten is that the current attempt to brand this new policy as an attack on pensioners and self funded retirees at the expense of those still in the workforce and on incomes of up to $85,000 a year, will gain traction.

Labor appears to have erred in adopting a simplistic and binary approach to what is a very complex policy area.

If, as he and his colleagues are claiming, the majority of the refunds are being paid to the relatively well off then surely a more nuanced solution could be found.

Fairfax political journalist David Crowe, writing in this paper earlier this week, suggested capping the payments at, say, $1000 per investor per year.

Such sensible suggestions appear to warrant further consideration by both sides of politics.