The Coalition agreed to a string of demands following a frantic 24 hours of horse-trading with the trio of South Australian senators. Labor immediately condemned the arrangement as a "dirty deal" that would do little to stimulate the economy, however the agreement represents a significant victory for the government ahead of the May budget.

Prime Minister Malcolm Turnbull said the decision would allow business to invest in new jobs.

"That is the fundamental leverage that cutting business tax delivers," he said.

"This is a real stimulus to growth and employment, it's a great day for Australian workers and Australian businesses."

Companies with an annual turnover of up to $50 million will see their tax rate cut to 27.5 per cent, at a cost to the budget of $5.2 billion over the next four years, and eventually to 25 per cent at a cost of $24 billion over the medium term. That is a little less than half the cost of the package originally proposed by the Turnbull government last year.

In exchange, senator Nick Xenophon extracted a one-off payment of $75 to singles and $125 to couples who receive the aged, disabled and carers pensions, to cope with rising electricity prices. That one-off payment will flow to nearly 3.5 million Australians, but cost the budget $260 million.

The government will also provide a $110 million loan for a massive solar thermal plant in South Australia, and a study will be held into constructing a long-mooted gas pipeline from the Northern Territory to South Australia.

The federal government has also told Parliament it may intervene in the gas export market if east coast producers fail to provide more supply.

The announcement by Finance Minister Mathias Cormann, who led negotiations with Senator Xenophon, handed a partial victory to the Turnbull government, which was desperate to pass at least some of its tax plan before the May budget.

"Many businesses across Australia and their employees will benefit from the increased investment, the increased job security and the increased opportunities for more jobs and higher wages that will come from legislating this plan today," Senator Cormann said.

"After a lot of good and effective work by crossbenchers in the Senate, the government believes we have been able to achieve a consensus across the chamber to reduce company tax."

Senator Xenophon said high energy prices were crippling Australian business and the deal would help tackle that problem.

The companies set to benefit "are not multinationals, these are family businesses, by and large", he said.

Senator Xenophon dropped his earlier demands for the government to introduce a politically-tricky Emissions Intensity Scheme in exchange for his support for a $50 million turnover threshold.

An estimated 870,000 companies in Australia - employing 3.4 million people - with a turnover of less than $10 million will benefit from the move to 27.5 per cent. Extending the deal to $50 million will see approximately 10,000 more businesses benefit from the lower tax rate.

Mr Turnbull said the government was committed to legislating the full 10-year plan to lower company taxes, but would only bring that to the Senate when it was convinced it had the numbers.

Earlier, Treasurer Scott Morrison announced the government had received advice from the Australia Tax Office it needed only to pass the legislation through the Senate on Friday for the cuts to come into effect. The House of Representatives will still need to pass the revised plan, but will likely do so when Parliament resumes on May 9.

"Any arrangements completed by the Senate would be able to be immediately acted upon by the ATO," Mr Morrison said.

The federal government's original plan, the centrepiece of the 2016 budget, was to cut tax for all companies from 30 per cent to 25 per cent over 10 years, through to 2026-27.

In a statement, the Business Council of Australia said the deal was an "historic step towards rebooting Australia's international competitiveness and prosperity" and urged Mr Turnbull to continue advocating for the full tax cut plan.

"Any politician can run from difficult reform, but it takes real leadership to stick to your guns, stare down your opponents and do what's right for the country," the group said.

Negotiations over the deal occurred behind closed doors all week, with the Senate sitting until midnight Thursday and late on Friday.

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