Australians earning up to $150,000 are expected to get a bigger cash boost from July under an overhaul of the government's stage three tax cuts plan.
Prime Minister Anthony Albanese took the proposed changes to and is expected to announce the revamped economic plan on Thursday.
Albanese said the new plan aimed to provide greater support to middle-income earners amid cost-of-living pressures.
The government will reduce the tax cut for Australians earning $200,000 or above by almost half to provide savings for low- and middle-income earners.
How will the tax cuts impact workers?
Most workers will be better off than they would have been under the existing package, while the benefit for those on the highest incomes will be halved.
Under the changes, due to take effect on 1 July, a person earning an average wage of $73,000 will get a tax cut of more than $1,500 a year.
Those earning $50,000 will pocket an extra $929 a year while people on $100,000 will receive $2,100.
Households on an average income of $130,000 will receive $2,600.
At the upper end, the stage three tax cuts for those earning $200,000 will be slashed from $9,075 to $4,500.
Following the afternoon meeting, Labor MPs confirmed to the ABC that they had agreed to the proposed changes.
Treasurer Jim Chalmers said the changes would provide more help with the cost of living.
"We’ve come to a different view on these stage three tax cuts because we've found a better way to provide more relief to more people who are under pressure," He said.
"The tax plan that the prime minister will outline today is better for middle Australia, it's better for cost of living pressures it’s better for women and workforce participation … and it's better for the economy."
When will the stage three tax cuts take effect?
The cuts are due to come into effect on 1 July.
However, the government will first need the support of the Greens and a number of crossbenchers to modify the previously legislated cuts.
Earlier this week, the Opposition promised to fight any changes to the stage three cuts policy.
How has the Opposition reacted?
On Monday, Opposition Treasury spokesperson Angus Taylor said any alterations to stage three cuts would represent a broken election promise and reminded Albanese that Australians voted for the policy at two elections.
Deputy Opposition leader Sussan Ley called Albanese "a liar".
"I remember him looking straight into the eyes of the Australian people and saying, 'My word is my bond and I won't change the stage three tax cuts'. But … this was the plan all along. The election was won on a lie," she told Sky News.
Chalmers defended the government's new proposal and said its necessity had become increasingly clear over the holiday period.
"It became increasingly clear to us over the summer that there was a much more effective way for the same amount of money to provide the cost of living relief that middle Australia desperately needs."
"We have changed our view and it’s a change for the better."
