Businesses with an annual turnover of $2 million or more will be denied company tax relief because the Coalition and the Greens will join forces in the Senate later this year to block a key element of the government's mining tax package.
In a policy turnaround yesterday, the shadow treasurer, Joe Hockey, said the Coalition would oppose not just the mining tax but the company tax cuts that it has been budgeted to fund.
This is a reversal on the position the Coalition adopted a year ago when it decided it would support the cuts associated with the mining tax because lower corporate tax was a core principle of the Liberal Party.
''We oppose the mining tax package, therefore we will be opposing the mining tax in the Senate, as we did in the House of Representatives, and any spending associated with the mining tax we will oppose,'' Mr Hockey said yesterday.
The government wants the Senate to pass the legislation for its Minerals Resources Rent Tax before Parliament rises for autumn at the end of next week.
The Greens said yesterday they would back the legislation after being guaranteed the company tax cuts would be dealt with in separate legislation.
The cuts will be contained in the May budget and be part of the budget legislation.
The mining tax will fund a reduction in the company tax rate from 30 per cent to 29 per cent, which will apply to small business from July 1 and to big businesses - those with an annual turnover of more than $2 million - from July 1, 2013.
The Greens support the small business tax cuts but have always opposed those for big business, which are worth $2.4 billion.
The Greens leader, Bob Brown, confirmed late yesterday the Greens would not be voting for the big business tax cut, believing the money would be better spent on other areas.
''The Greens have made it clear, I've made it clear since March last year that we would oppose the corporate tax cuts - that's $2.4 billion which should be going to health and education, and high-speed rail, the government services, which instead under this government legislation will go to the big corporations,'' he said.
''But what's made today even more important is the opposition's confirmation that they will be opposing the tax cuts when they come in the budget session, a couple of months down the line.''
It is believed the legislation, the draft of which will be released today, will be structured to enable the Greens to oppose the big business cuts but support them for small business.
This will put pressure on the Coalition to revert to its position of March last year, and pass the tax cut legislation to give larger companies a break as well.
The Treasurer, Wayne Swan, said the Liberal Party should hang their heads in shame.
''The once-proud party of Menzies and Howard has today confirmed for the first time it will vote against tax cuts for small business and companies,'' he said.