The federal government has dumped the proposed 19 per cent backpacker tax rate and will instead do a compromise deal on a 15 per cent rate.
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Treasurer Scott Morrison announced the government's second compromise, which will cost the budget $120 million over four years, on Monday morning.
Initially former treasurer Joe Hockey announced in the May 2015 budget that all holiday workers would pay 32.5 per cent tax from the first dollar they earned.
The government had announced a move to a 19 per cent rate back in September, with a $5 rise in the passenger movement charge to help pay for the reduction from 32.5 per cent.
But Mr Morrison brushed aside suggestions from former prime minister Tony Abbott that some of the more controversial measures contained in the 2014-15 budget should be revived as part of a renewed budget repair push.
"I don't think a re-run of the 14-15 budget is what the government is looking at, no," the Treasurer said, while dismissing questions about whether Mr Abbott should return to cabinet.
The decision ends an 18-month stand-off over the tax and ensures that a 32.5 per cent rate - which alarmed farmers and Nationals MPs, who rely on backpackers for seasonal work and which was due to kick on January 1, will not come into effect.
The government expects that as a result of the deal, it will be able to steer the laws through the Parliament this week with the support of the three Nick Xenophon Team senators, the four Pauline Hanson's One Nation senators and independent Derryn Hinch.
"This week, hopefully even today, this matter is resolved. But this matter has gone through needless difficulty because of the bloody mindedness and the political game machine playing of the Labor Party," he said.
"It means that we will be able to move forward and the Parliament will now have a $120 million bill to deal with as a result of making this change."
Mr Morrison later told parliament the compromise with the crossbench meant that "we will achieve $640 million [in revenue raised] of the $760 million that was set out in the 16-17 budget".
The additional $120 million cost of the compromise would be dealt with in the mid-year budget update, Mr Morrison said, so that it would "wash its face".
The 15¢ rate is expected to apply up to $37,000, and then normal tax rates will apply.
The Treasurer said there was no prospect of a further compromise at a 12 per cent rate that would rise to 15 per cent over time, an idea floated by Ms Hanson.
Senator Hanson said One Nation welcomed the government's decision to compromise at 15 per cent.
"Most importantly this is a win for farmers, small business and tourism but this is also a win for One Nation and a win for commonsense," Senator Hanson said.
The National Farmers' Federation said the compromise was welcome and the Senate should pass the bill expeditiously.
"It has been a painful process but we wholeheartedly welcome the announcement that a compromise rate of 15 per cent has been reached," chief executive Tony Mahar said.
Asked about the stand-off with Senator Xenophon over water allocation to South Australia - which will potentially hold up the backpacker tax vote and the vote over the government's proposal to revive the construction industry watchdog - Mr Morrison said those negotiations were a matter for other ministers.
"I know Senator Xenophon is very committed to ensuring that this matter gets resolved. How that works its way through the Senate, I will leave to my colleagues who understand the mysteries of the Senate far better than I do."
