Pensioners will now be exempt from Bill Shorten’s retiree tax grab after a fierce community backlash that Labor feared would hurt them in marginal seats at the next election.

The exemption for pensioners will come in the form of a ‘Pensioner Guarantee’ scheme. However, SMSFs with large balances remain firmly in Labor’s sights.

“Labor is cracking down on this tax loophole because it will soon cost the budget $8 billion a year,” Mr Bowen said.

“Much of this goes to high-wealth individuals, with 80 per cent of the benefit accruing to the wealthiest 20 per cent of retirees. The top one per cent of SMSFs received an average cash refund of more than $80,000 in 2014-15,” he said.

“Labor does not think it is fair to spend $8 billion a year on a tax loophole that mainly benefits millionaires who don’t pay income tax,” he said.

The reform has been largely slammed by the SMSF community, particularly given its original design means retirees with modest savings would be impacted.