Government faces fight on income tax cuts after Labor votes against $144bn plan

The future of income tax cuts is on a knife edge after Labor formally decided not to back the Coalition's entire $144 billion package. 

Labor MPs voted unanimously to support tax cuts for low-income earners immediately, but to oppose stages two and three. 

The government will have to rely on eight of the 10 senate crossbenchers to pass the legislation, but at this stage it doesn't have the numbers. 

But, as Labor Leader Bill Shorten condeded, "no-one can predict what this senate will do". 

Labor has promised to repeal the final two stages in government, if the Bill passes the upper house. 

The decision sets up a showdown over tax at the July 28 'Super Saturday' by-elections, and also the next federal election, with Shadow Treasurer Chris Bowen urging the government to "bring this debate on".

Shorten said Labor's tax policy was "fairer and more responsible" and the government could guarantee tax cuts for over 10 million workers immediately if it was prepared to split the Bill. 

The government though is refusing to amend the legislation, saying it must be passed in full. 

"We'll vote for this year's tax cut this year,' Mr Shorten said. 

"We're prepared to stand by our values and do what's responsible. We're promising fairer and more responsible tax cuts. 

"We are prepared to fight on our bigger, better, fairer tax cuts." 

The Greens today decided to support the legislation being broken up, but will oppose tax cuts in any vote. 

The Labor decision gives the government a weapon to argue Bill Shorten is standing in the way of tax cuts. 

Labor, though, will argue the cuts could be passed today if the government agreed to split bill. 

Finance Minister Mathias Cormann is now furiously negotiating with crossbenchers, but appears to be one vote short. 

The government wants the legislation dealt with by the end of the sitting fortnight before Parliament's long winter break. 

The issue dominated a heated Question Time, with a fired-up Prime Minister accusing Labor of abandoning its working class base. 

Saying those on less than $125,000 would be better off under their tax cuts, the Opposition repeatedly asked Malcolm Turnbull why he wouldn't support Labor's "bigger, better, fairer" plan. 

"We are a government that believes in Australian's enterprise and aspiration," Mr Turnbull told the house. 

"Aspiration is at the heart of everything we do.

"Labor has failed and failed the very people they were founded to represent." 

At times red in the face, the prime minister accused the Labor Party of being full of "university-educated", privileged, elite. 

"This Labor Party is a disgrace to the Labor history, and Labor leaders of the past," he said.