Treasurer Andrew Barr has pushed back his unpopular payroll tax regime changes a further three months, giving contractors till January 1 2015 to adjust to the 6.85 per cent tax.
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The change could leave a $5 million hole in the budget.
The tax was announced in the June budget, taking Canberra's contractors by surprise.
It sparked an angry reaction, with an estimated 1000 contractors losing their payroll tax exemption and facing pay cuts amounting to thousands of dollars.
The move was expected to bring in an extra $10 million a year in tax - an average $10,000 for each of the 1000 contractors the government estimated would be affected by the new regime.
The tax change was to take effect on July 1, but under pressure from contractors the government pushed the start date back to September 1. On Tuesday, after further criticism from the cross-party estimates committee, Mr Barr pushed the date back further, to January 1.
His announcement is a big win for contractors but still short of the committee's recommendation for a start date of July 2015.
Contractors complained that they had already signed 12-month contracts to June 30 next year before the new tax was announced and rather than absorbing the tax themselves, their employers were passing it on to them, attempting to cut their pay to cover it.
Canberra IT contractor Howard Taylor said the further delay was "a win" but would still adversely impact income for thousands.
"It is better but to us it is still a retrospective change because we’d all signed contracts before the changes were announced," he said.
"I think you will find everyone still believes they are being unfairly hit and have no way of avoiding the tax. The whole premise of what the Treasurer was saying is people are doing something that is illegal because we’ve been exploiting a loophole, but that is what every taxpayer does if they can."
Mr Taylor said even with the now six-month delay, the change would cost him about $500 a month.
He predicted further action from contractors working in the ACT.
"To my mind, it should be pushed back to the end of the financial year so people can adjust to it properly," Mr Taylor said.
Compas contracting agency partner John Vassallo said he had spent more than 50 hours revising contracts for about 110 IT workers.
Mr Vassallo said Tuesday's changes didn't go far enough and called on Mr Barr to exempt all contracts signed before the budget and extending beyond January 1, 2015.
"This is crazy. Let existing contracts stay under the old rules and any new contracts from the legislation date can pay payroll tax," he said.
"We have very many contracts signed in good faith before June to last until next June. We have to throw them away and renegotiate."
Mr Vassall said payroll payment management companies would continue to suffer even with the further three month delay.
"We might have to terminate a few of the existing contracts if the employee doesn't agree with the reduction in the rate," Mr Vassallo said.
Opposition treasury spokesman said Mr Barr's moves showed the tax changes "were wrong from the start".
"What they should do is walk away from it or at the best start it on July 1 next year," Mr Smyth said.
"It is about getting it right and as the Treasurer said in estimates, it wasn't their intention that people would suffer a wage cut as a consequence of this act but clearly they are."
Mr Smyth said contractors should continue to pressure the government to halt the implementation of the change until the start of the 2015-16 financial year.
