While the political debate has focused on individuals aged over 65, the majority of the revenue from the Labor plan comes from self-managed superannuation funds. Other targets include discretionary trusts and individuals of working age with low incomes but large share portfolios – for instance, people with working partners.

In a positive development for the government on Tuesday, Senator Hanson stepped back from her outright rejection of Mr Turnbull's company tax cut policy as it heads to a vote in the Senate this fortnight.

"I've got an open mind about this. It is very important to Australia. I'm not going to do anything that jeapordises investment in Australia," Ms Hanson told Sky News on Tuesday.

This is a turnaround from her earlier rejection of the bill, but the government is struggling to convince other senators and needs nine out of the 11 crossbenchers to prevail.

In an attack on Mr Shorten's dividend imputation policy, Mr Turnbull will on Wednesday warn the plan will cancel cash refunds to 84,569 pensioners in NSW, 60,956 in Victoria, 42,721 in Queensland, 21,011 in Western Australia, 18,294 in South Australia, 6,091 in Tasmania, 3,877 in the ACT and 433 in the Northern Territory.

“We believe in lower taxes, not higher taxes. We certainly don’t believe in double taxing pensioners to create more revenue in the budget,” the Prime Minister said in a statement.

Mr Shorten and Labor treasury spokesman Chris Bowen are canvassing ways to adjust policy to look after older Australians, such as imposing a cap on the cash refunds for the franking credits rather than cancelling

A cap of $1,000 would spare about two thirds of the individual taxpayers over the age of 65. Labor would have to increase the cap to exclude nine out of 10.

The government was accused on Tuesday of making “deeply misleading” claims about those being hurt by the Labor policy, given it is possible for many retirees to have a low taxable income at the same time they hold substantial assets.

Grattan Institute researchers Brendan Coates and Danielle Wood concluded that most of those affected by Labor’s new policy are “far from being low-income earners” because the $18,200 tax-free threshold gives a misleading impression of their overall wealth.

“The government claims that 54 per cent of people affected by Labor’s policy — some 610,000 individuals — have taxable incomes of less than $18,200,” Mr Coates writes.

“And it says that 86 per cent of the value of all franking credits refunded are received by those with taxable incomes of less than $87,000 a year.

“These claims are deeply misleading. Taxable income ignores the largest source of income for many wealthier retirees: tax-free superannuation.”

The Grattan analysis uses the example of a self-funded retiree couple with a $3.2 million super balance in two super funds as well as their own home, with an additional $200,000 in Australian shares held outside super.

“Even drawing $130,000 a year in superannuation income, and $15,000 a year in dividend income, they would report a combined taxable income of just $15,000, and pay no income tax whatsoever,” Mr Coates and Ms Wood write in the analysis published in Inside Story.

That conclusion has sharpened the debate over the relative wealth of various Australians over 65 and the share of the $5.6 billion they might pay, rather than simpler numbers about the total number of pensioners with cash refunds.