Eden-Monaro MP Mike Kelly has hit back at claims the Labor Party's proposed reforms to excess dividend imputation credits will affect the "lifestyle" of retirees.
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Dr Kelly said a letter to residents from the electorate's Nationals candidate Sophie Wade labelling the policy a "retiree tax" is part of a "scare campaign", causing "unnecessary stress" to seniors.
Ms Wade said the plan will affect "over 6900 seniors in areas like Bega, Tumut, Queanbeyan and Cooma".
"This is a bad tax from a bad party that has told seniors if they don't like the tax hikes they should vote against Labor. That's the first sensible thing they've said on the issue," Ms Wade said.
Dr Kelly denied the policy is a tax, and said the government is currently spending more on paying out the shareholdings cash refunds, which are also known as franking credits, than public schools.
"Failing to reform this loophole puts a greater tax burden on low and middle income working Australians," he said.
"Labor's reform will remove the unfair loophole where people receive a cash refund despite paying zero tax.
"Labor's reform to dividend imputation is not a tax, and it is unconscionable that the National Party would send out a letter like this and cause anxiety amongst our senior citizens."
Dr Kelly said the current policy, which was introduced by former prime minister John Howard mainly benefits residents with a large amount of wealth invested on the stock market.
Liberal Party candidate for Eden-Monaro Fiona Kotvojs claimed Dr Kelly's comments were a "distortion of the truth".
She claimed the policy is "not fair" and echoed National Party claims the policy is a "tax grab to get extra money".
"There's a whole range of inequities," Ms Kotvojs said.
"The guys who have made this decision are on good incomes."
Ms Kotvojs claimed the policy has also been created to encourage people to move from self-managed to industry superannuation funds.
"We should be encouraging people to be self-sufficient and independent in retirement," she said.
A controversial parliamentary inquiry prompted by treasurer Josh Frydenberg has been hearing from concerned seniors on the policy.
Last year shadow treasurer Chris Bowen said "every pensioner will still be able to benefit from cash refunds" at a time when the cost of living is increasing, and accused the government of "trying to force Australians to work until they are 70".
