Income tax cut laws head for Senate battle

Katina Curtis and Rebecca Gredley
(Australian Associated Press)

Australians earning up to $90,000 look set to get an extra $1000 back in tax within weeks, with the federal government on the verge of winning the Senate support it needs for stage one of its tax package.

The $158 billion package passed the lower house on Tuesday night after about three hours of debate, with Labor failing to secure an amendment to bring forward the second stage of the package.

Labor leader Anthony Albanese said it was a sensible proposition given the central bank's second interest rate cut in as many months.

The opposition also failed to remove the third stage of the tax plan from the bill, which flattens the tax bracket in 2024/25.

"That's all about politics, not about good sound economic policy," Mr Albanese told the lower house.

But Treasurer Josh Frydenberg said it would give Australians confidence their future pay rises were protected from bracket creep.

"This bill lowers taxes for hard working Australians, it puts more money in their pockets."

Centre Alliance MP Rebekha Sharkie supported the bill on her understanding the minor party would reach an outcome with the government on ways to bring down gas prices.

But Ms Sharkie noted her two Senate colleagues were still continuing negotiations with the government.

Labor will now try to convince Senate crossbenchers to support the amendment on Thursday, but the government appears to be moving closer to a deal to get the whole package passed before parliament rises.

The coalition needs the support of four out of six crossbenchers to succeed.

The two Centre Alliance senators are likely to back it, with leader Rex Patrick saying they were working through the final details of a deal to make sure the extra money in taxpayers' pockets doesn't get gobbled up by higher power bills.

Former Liberal Cory Bernardi also backs the tax relief package, leaving the government just one vote short.

This means returning Tasmanian senator Jacqui Lambie is likely to be the deal maker or breaker, but she's yet to declare her hand.

She is working with Centre Alliance in a very loose alignment, with the three senators meeting several times over the last 24 hours since arriving in Canberra.

Senator Patrick said part of the deal was that he and colleague Stirling Griff don't talk about Senator Lambie's position.

Senator Lambie told reporters she hadn't come to a position yet, saying her staff only started work on Monday and she hadn't had enough information from the government.

Senator Griff argues there's no use entertaining Labor's position, given the government has refused to budge on its three-stage plan, describing it as an all-or-nothing proposition.

Some opposition MPs have urged the party to back the full tax relief package.

The Greens implored Labor and the crossbench to stand firm if the Senate was forced to vote on the entire package.

"We don't need to be giving tax cuts to millionaires, to CEOs, to politicians; we need to be funding essential services," leader Richard Di Natale told reporters.

The first stage of the plan will deliver up to $1080 to low and middle-income earners when they lodge their tax returns in coming months.

The second stage will top up a low-income tax offset, which means more people earning up to $45,000 instead of $41,000 will get a 19 per cent tax rate.

The final stage flattens the tax rate from 32.5 per cent to 30 per cent for people earning between $45,000 and $200,000 from mid-2024.