The true extent of the damage to tax receipts by a system which allows tax-free earnings for those over 60 is revealed in research by the Parliamentary Budget Office.

It found that the refund of franking credits on share dividends – which has resulted in people with millions of dollars in self-managed super receiving cash cheques from the Australian Taxation Office at the end of the year – are a net negative on tax receipts.

That's despite the pool of superannuation growing from a few hundred billion dollars just over a decade ago to more than $1.9 trillion today.

The issue will be raised at a much-anticipated first public hearing of the Senate inquiry into corporate tax avoidance in Sydney on Wednesday.

Fairfax Media has learnt that committee chairman Sam Dastyari wrote to Tax Commissioner Chris Jordan on Tuesday, requesting he come armed with detailed information, including incomes and ages, of those people benefiting from refunds on share dividends.

The system of "dividend imputation" was introduced by then treasurer Paul Keating in 1987 to avoid shareholders being taxed on dividends after companies had already paid the corporate tax on them.

In 2007, then Prime Minister John Howard removed the need for people in the so-called "pension phase" – those over 60 – to pay 15 per cent on super fund earnings. This followed a decision in 2000 to allow people to claim "excess" franking credits back from the ATO.

Superannuation assets are expected to grow from $1.9 trillion to $6 trillion by 2030, meaning the cash leaking out of the budget due to dividend imputation will also rise dramatically unless addressed.

The matter was raised briefly in Treasurer Joe Hockey's recent tax discussion paper. It was also highlighted in the draft report of David Murray's financial services inquiry but was left out of the final report.

"Due to refundable imputation credits and tax-free superannuation in retirement, a growing proportion of company tax collected could be refunded to superannuation funds and retirees. Although this is of enormous benefit to retirees, it may erode one of the largest sources of revenue for the Australian government at the same time expenditure pressures are increasing," Mr Murray found.

The internet is awash with super spruikers advocating the "extremely powerful" benefits of franked income.

The self-managed industry has declared its intention to fight any changes to imputation credits, saying franked dividends provide the rock that a successful super system is based on. "An income stream from franked dividends is a very reliable source of income," said Duncan Fairweather, executive director of the SMSF Owners' Alliance.

There have been warnings that reform will not necessarily deliver the revenue boost anticipated because companies will return capital to shareholders in different ways and super fund account holders could look elsewhere to invest for retirement.

But John Daley, chief executive of the Grattan Institute, said super would remain attractive even if earnings are taxed at 15 per cent. "If that's your effective tax rate and you've got millions of dollars doing it, you'd normally be breaking the law somewhere," he said.

The PBO research into government receipts, released last year, found the "effect of franking credits on earnings tax" represented 0.4 of a per cent of GDP in 2012-13. But it went unreported that that figure represents $6 billion when calculated against the $1.56 trillion GDP in 2014.

Both sides of politics have acknowledged the need for reform. Last week Mr Hockey said: "Anybody who deals with the numbers in this area knows the super system is not sustainable. The overall system costs a fortune, we can do better, the government knows it, it's the community debate that has to reach that view."

A recent report by the Association of Superannuation Funds of Australia found 70,000 people have super balances in excess of $2.5 million and 24,000 self-managed funds in the pension phase with balances in excess of $2 million received around $5.2 billion in tax-free income stream payments – or an average of around $216,000.

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