The Turnbull government has moved closer to victory on its signature childcare package by watering down proposed cuts to family payments and extending the taxpayer-funded paid parental leave scheme.
The government will on Wednesday introduce a bill into Parliament containing both its childcare and family tax benefit changes.
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The Government wants to rein in spending on paid parental leave to save money in the budget but there's a lot of opposition to the proposal. Courtesy ABC News, Channel 7.
Key crossbencher Nick Xenophon said the government was moving in the "right direction" and One Nation leader Pauline Hanson indicated her support.
The government is pushing ahead with plans to abolish family tax benefit supplements worth up to $726 a year per child, but will soften the blow by increasing fortnightly payments for those on Family Tax Benefit Part A by up to a $20 a fortnight per child.
The government is also ditching plans to remove Family Tax Benefit B payments for families when their youngest child turns 13. Parents will now be eligible for the payments until their child turns 17.
The savings from social security payments are worth around $5.5 billion over four years while the childcare changes will cost $1.3 billion.
The taxpayer-funded parental leave scheme will also be extended from 18 weeks to 20 weeks, expected to provide an extra two weeks leave to around 100,000 families.
Parents who receive paid parental leave from their employer will be able to top up those payments with government-funded leave to a combined 20 weeks.
The government's childcare changes will roll the current Child Care Benefit and Child Care Rebate into one means-tested payment and abolish the annual $7500 rebate cap.
Prime Minister Malcolm Turnbull said the changes were a "very big social reform".
"What we're proposing - and we're seeking the support of the Senate - is reforms that will make childcare more affordable and more available, especially for families on lower incomes," he said.
Senator Xenophon, whose party's votes will be crucial for the government, said his vote was not locked in but welcomed the revamped package.
"I think philosophically, if you replace a supplement with increased weekly payments, then obviously that is a step in the right direction," he told ABC TV.
Senator Hanson said the government was handing out a "lot of money" to families and payments need to be cut to reduce the national debt.
"We've got to rein back on our welfare payments," she said.
Labor families spokeswoman Jenny Macklin said the party remained opposed to the combined package.
"We think the government is going to hurt millions of Australian families with these cuts," Ms Macklin said.
"These cuts will see some of the poorest families in Australia lose more money.
"They will have to spend either less time at home with their newborn baby or have their standard of living reduced."
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