High-income earners on more than $180,000 will be the only ones to pay the deficit tax after Cabinet ministers yesterday voiced their opposition to middle-income earners being hit by the impost.
The West Australian understands they will pay an extra 2 per cent on income above $180,000, raising about $5 billion over the next four years.
The Abbott Government's Budget razor gang first wanted a one per cent levy to also apply on incomes of more than $80,000, which would have raised an extra $5 billion.
But Cabinet ministers yesterday told Prime Minister Tony Abbott and Treasurer Joe Hockey that they could not support a deficit levy applying to incomes below $150,000.
Though neither the PM nor the Treasurer told Cabinet ministers what the final design of the deficit tax would be, it is believed the Government will exempt those on the 37 cent marginal tax rate or earning between $80,000 to $180,000.
About 4 per cent of taxpayers will pay the deficit tax.
Mr Abbott is believed to have made it clear to Cabinet colleagues that he understood their anxiety but would not back down on the deficit tax because there was no other option available to ensure high-income earners such as MPs contributed to the Budget repair job. It means that the Government's first Budget locks Mr Abbott into breaking an election pledge not to introduce new taxes.
The prospect of a deficit tax has already sparked open dissent, with Queensland Liberal MP Teresa Gambaro saying it would be a "breach of trust" that would have a devastating effect on consumer confidence.
Former Liberal treasurer Peter Costello and backbenchers Warren Entsch and Corey Bernardi have also voiced their disapproval.
But the Prime Minister would not flinch, saying: "I'm going to be able to look people in the eye on Tuesday night and on Wednesday morning and beyond and say we are all in this together, we are all doing our bit."
Finance Minister Mathias Cormann indicated that the deficit tax was needed while other structural reforms cranked up.
"They take time to really kick in, so there is a need for a special, additional, immediate effort that is well targeted," he told The West Australian.
"If we continue to fund our consumption today through deficits, we are reducing the opportunity for our children and grandchildren.
"That is why we have the responsibility to fix the Budget sooner rather than later."
Yesterday's Cabinet meeting also confirmed the Government would terminate the ABC's international broadcasting service Australia Network, saving about $70 million.
In 2011 the Gillard government awarded the $223 million 10-year Australia Network contract to the ABC, cancelling a tender process won by Sky News.
The Government believes that if the ABC wants to continue broadcasting into the 44 nations that receive Australia Network it could lift the geo-block that prevents ABC24 being watched from overseas.
Opposition Leader Bill Shorten said Tuesday's Budget loomed as an attack on millions of Australians who relied on the health system.
"A new GP tax, more expensive medicines, a new hospital tax," Mr Shorten said.
"If Tony Abbott gets his way in this Budget, it will be the end of universal health care in Australia."