The federal government has scrapped plans to trade away annual work-related deductions to find revenue to fund other tax cuts after concluding it would not stack up either economically or politically.

The decision to leave tax deductions unchanged, which is related to the earlier decision to leave the rate and base of the GST unchanged, has further limited options for what is a politically critical May 3 budget for the government which will contain tweaks to superannuation tax concessions and limited measures targeting small and medium business.