Turnbull drops $8bn Medicare levy increase

(Australian Associated Press)

Australian taxpayers will be spared a future tax hike as the Turnbull government scraps an $8 billion increase to the Medicare levy.

The increase, a signature measure of the 2017 federal budget, was aimed at covering the costs of the National Disability Insurance Scheme.

But Treasurer Scott Morrison is set to release better-than-expected tax receipts to show the extra 0.5 per cent hike is no longer needed.

"All planned expenditure on the NDIS will be able to be met in this year's budget and beyond without any longer having to increase the Medicare levy," he will tell business economists on Thursday.

Mr Morrison will say tax receipts up until February were running $4.8 billion higher than estimated in December, thanks to company profits, a temporary commodities boost and a jobs boom.

The treasurer will again accuse Labor of leaving a $57 billion shortfall in NDIS funding when it left office.

"The reason we proposed to increase the Medicare levy was only to fully fund the gap left behind by Labor on the NDIS," he will say.

"We no longer believe we need to do this."

Negotiations over the government's bill have stalled in the Senate.

Labor had proposed to restrict the 0.5 per cent Medicare levy increase to those earning more than $87,000.