Voters will head to the polls in the Victorian seat of Dunkley on Saturday, following the death of Labor MP Peta Murphy.
The Albanese government is fending off a Liberal challenge for the seat, which is shaping up as Labor's first major electoral test as it heads into an election year.
Labor holds the seat with a margin of 6.3 per cent and a recent YouGov poll of 394 Dunkley voters found the government was ahead of the Liberals at 51 per cent to 49 per cent on a two-party preferred basis.
The amended tax package, which skews toward lower paid workers, cleared the Senate on Tuesday night and will take effect from July 1.
Prime Minister Anthony Albanese defended the government's decision to backflip on an earlier promise not to alter the tax cuts legislated by the former coalition government as "good economic policy".
"People know that this was not an easy decision, but it was the right decision done for the right reasons," he told Seven's Sunrise on Wednesday.
"Our objective here is for people to earn more and keep more of what they earn.
"And that is what this is about, not leaving people behind."
Australians earning less than $150,000 will get a larger return than was promised under the so-called stage three tax cuts, which were legislated in 2018.
Those earning more than $150,000 will still receive a tax cut but it will be less than originally planned.
Meanwhile, asked about claims made by the nation's biggest health insurers that the government was delaying approval of their applications for an increase to premiums until after the by-election, Mr Albanese said it was a "nonsense story".
"We've done what other governments have done to be fair as well, which is to go back and try and get the best deal possible for consumers," he said.
The government has been accused by the opposition of being distracted from the cost of living crisis, as households manage high food prices and interest rates.
Deputy Liberal leader Sussan Ley said the government's tax measures were coming too late for workers.
"Costs are rising children's expenses, grocery expenses, electricity expenses, fuel expenses, and this is all that their weak prime minister can actually produce for them," she told Sky News.
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