A parliamentary inquiry has been established to analyse the party's proposal to close what they consider a tax loophole, which could soon cost the country $8 billion a year.

Franking credits are used by self-funded retirees to reduce any income tax paid on share dividends and can result in tax refunds.

Labor has promised to protect pensioners and partially funded pensioners from the plan.

Shadow Treasurer Chris Bowen has said 80 per cent of the tax benefit went to the country's wealthiest 20 per cent of retirees.

"The top 1 per cent of self-managed superannuation funds received an average cash refund of more than $80,000 in 2014-15," he said last year.

But Association of Independent Retirees Tasmanian division secretary Susan Shea said the proposal would in fact allow wealthier retirees, which superannuation funds above $1.6 million, to offset their credits against the 15 per cent tax on investment growth and allow them to more easily arrange share portfolios.

"This proposed policy is unreasonable, unfair, discriminatory, unjust and poorly considered in relation to its impacts on self-funded retiree investor," she said

"Overall, those retirees with self-managed superannuation funds which are above the assets test for a Centrelink pension but below the $1.6 million balance in superannuation will lose up to 30 per cent of their annual retirement incomes.

"Current retirees invested their savings according to the rules in place at the time of their retirement."  

Mrs Shea said the proposed changes extra stress and anxiety to people now not in a position to replace potential lost funds.

"To boost their incomes and maintain their current living standards, many retirees will be forced to reduce their assets so they can qualify for a part-pension which will enable them to retain their excess franking credits," she said.

She said some affected retirees might turn to more risky yet investments, which yielded higher income returns such as investment in international shares or property or mortgage funds.

A House of Representatives committee has received 999 submissions on the proposal.