The federal government has beaten a tactical retreat on welfare cuts in its budget in order to ring-fence nearly $4 billion in savings after it became clear it would lose its entire package of welfare changes worth in excess of $9 billion to the bottom line.

In closed-door talks with the opposition on Wednesday, the ministers in charge of the welfare reform package, finally conceded they cannot find the numbers and will need to split the omnibus legislation up to secure those aspects for which there is Labor or crossbench support - that is, proposed changes to the Family Tax Benefit (part B) threshold through lowering the upper income limit of the primary earner to $100,000 rather the current $150,000 cutoff.

In direct negotiations with the opposition's welfare spokeswoman, Jenny Macklin, on Wednesday, the relevant ministers, Social Services Minister Kevin Andrews and Assistant Social Services Minister Mitch Fifield, indicated they would divide the legislation, allowing those parts with opposition and/or Greens support to go forward while the rest would sit in abeyance.