The One Nation leader said Australians with incomes higher than $200,000 a year would barely notice an about $7000 tax break, accusing Labor of being focused on the "big end of town".

"It is all about the people below that income, they need a hand."

"I think it is so ironic that the Labor Party, they are supposed to be looking after the battlers, they are clearly not," Senator Hanson said.

Labor had tried to force the government to split the bill, arguing new benefits for low and middle income earners worth $530 from July should be the immediate priority.

Senator Pauline Hanson dropped her opposition and voted for the government's tax cut plans on Thursday. Alex Ellinghausen / Fairfax Media

Centre Alliance senators Rex Patrick and Stirling Griff supported the government, despite remaining opposed to the third stage for high incomer earners, set to kick in from 2024.

"We are certainly not going to stand in the way of low to middle-income earners receiving tax cuts," Senator Patrick said.

The win establishes a key battle between the government and Labor, with both sides preparing to fight the next election on tax and competing claims to aspirational voters and working Australians.


Both sides will campaign on tax ahead of next month's super Saturday round of byelections.

At the cost of about $20 billion, stage one, which begins on July 1, is worth about $530 a year to low-and-middle-income earners.

Stage two begins on July 1, 2022 and will take the $90,000 threshold under which the 37 per cent tax rate applies to $120,000, meaning everyone under that income will pay a maximum 32.5¢ in the dollar.

Stage three would begin in July 2024, abolishing the 37 per cent bracket and apply 32.5 per cent to all earnings between $41,000 and $200,000. The rate above $200,000 will stay at 45 per cent, which currently applies to earnings over $180,000.

With personal income tax changes secured, the government will use next week's final sitting before the six-week winter break to make the case for its company tax plan.

Its future in the Senate is far from secured, with key crossbenchers Tim Storer and the Centre Alliance not on board.

After the vote, Mr Turnbull said the cuts would help Australians realise their dreams.

"This is the most comprehensive reform of personal income tax in a generation," he said.


"We want you to keep more of the money you have earned.

"It is fair. It rewards and encourages enterprise, it encourages and enables aspiration."

Shadow treasurer Chris Bowen said the government was being reckless with the nation's finances.

"It celebrates when it locks in $144 billion of income tax cuts when they can give no certainty, no guarantees about whether they are affordable or sustainable," Mr Bowen said.

Small and Family Business Minister Craig Laundy said the government was comfortable with the prospect of fighting Labor over tax cuts.

"For me, do I want to go at the next election... with tax reform across the board, structural reform and decreases for everybody, not picking out groups and making class wars out of it?

"And company tax cuts? Absolutely," he said.