Fears in Australia a tax on working backpackers would send its agricultural workforce to New Zealand have delayed the plan and put it in doubt.
The change would have meant backpackers on working holidays would be taxed at a rate of 32.5 percent tax on all earnings from July 1.
At present all workers in Australia pay tax only on earnings declared above an $A18,200 threshold.
Australia's agriculture and tourism sectors expressed concerns higher taxes would encourage people to go to countries such as New Zealand or Canada for their working holidays instead.
Australian horticultural business owners were worried they would not then have enough workers to harvest their crops.
Deputy Prime Minister Barnaby Joyce is expected to announce within the next fortnight that the introduction of the tax would be delayed for at least six months.
But one Liberal MP said it was more likely to be a year-long delay, which would effectively "kill it".
Canberra had hoped the backpacker tax would deliver revenue of $A540 million over three years.
Some federal politicians supported a level of tax to ensure local workers would not lose work to backpackers who were cheaper to employ, while also ensuring farmers could get enough help to harvest crops.
A delay would allow Canberra time to consider introducing a new class of visa, specifically for working backpackers, which would likely include some rate of tax.
Prime Minister Malcolm Turnbull indicated the government may reconsider its decision to impose the higher tax rate on backpackers.
"We have been listening very carefully to the concerns expressed in regional communities about that change ... and we'll have more to say about that in the future," he said.
The Australian government currently encourages backpackers to work in agriculture by giving them a tourist visa for a second year if they work on a farm for three months.