The low- and middle-income tax offset (LMITO), sometimes called the "lamington'' offset, was introduced in 2018 under the coalition government as part of three-stage reforms to the tax system.
Treasurer Jim Chalmers said the measure, designed to give low- and middle-income earners immediate tax relief, was due to end as specified by former treasurer Josh Frydenberg in the lead-up to his final budget last May.
"At the time, my predecessor Josh Frydenberg said this is not a permanent feature of the tax system," Dr Chalmers told reporters in Brisbane.
Over the weekend, shadow treasurer Angus Taylor said the government was axing the tax hike at a time when Australian families were struggling under the pressure of rising living costs.
He also said the government was trying to bury its decision to cut the offset and was not being up-front with Australians.
Dr Chalmers said Labor made it clear that it could not afford to extend the low- and middle-income tax offset if it won the federal election.
"We made it clear at the time that the LMITO was ending last year, and so it has been completely and predictably dishonest from Angus Taylor, Michael Sukkar and all of these other B-graders to now pretend that this is some kind of new announcement made by the government," he said.
Liberal MP Karen Andrews said the government was spending too much time attaching blame to the coalition for issues facing Australians.
"They have spent every single day personally attacking members of the opposition and doing nothing but saying that all of the woes that Australia is experiencing are because of the coalition," she told Sky News.
"It's actually time for the Labor government to get out there and proactively sell what they're doing."
Despite the disappearance of the tax relief measure, Dr Chalmers said there would still be cost-of-living assistance in the May budget.
He said the $1.5 billion in electricity bill assistance would take the sting out of high energy prices.
Dr Chalmers said the budget would also focus on building resilience against international shocks as the global economy faced its slowest growth rate in three decades.
The treasurer is due to head to Washington for key talks with world counterparts, with global financial uncertainty set to dominate discussions.
Dr Chalmers will take part in the G20 finance ministers' talks in the US, as well as IMF and World Bank meetings and central bank governors' meetings during the three-day trip.
He will hand down his second budget on May 9.
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