The Senate has rejected the federal government’s plan to slash the corporate tax rate from 30 to 25 per cent.

Finance Minister Mathias Cormann had made a failed last-ditch attempt to drum up key crossbench support by carving out Australia’s big four banks.

But the legisation was defeated 36 votes to 30 in the Senate on Wednesday. The government – in the midst of its leadership turmoil – will now have to decide whether to ditch the policy.

On Tuesday, Senator Cormann made the offer to key crossbenchers, including One Nation leader Pauline Hanson and her colleague Peter Georgiou, to exclude Commonwealth Bank, ANZ, NAB and Westpac from the cuts.

The proposed changes did not extend to capping the tax rate being cut from 30 to 25 per cent for businesses with $500 million – as suggested by independent senator Derryn Hinch.

Senator Hinch had said he would support carving out the banks.

But Senator Hanson said she would not support the compromise because One Nation wasn’t shown draft laws.

“No draft legislation was ever received and I can confirm Senator Georgiou did not receive this alleged document either,” she said on Tuesday.

Parliament has already agreed to deliver tax relief to companies with an annual turnover of up to $50 million, but the 25 per cent rate will be brought in gradually.

Labor estimates bringing forward tax cuts for businesses turning over under $50 million could cost the budget $1.8 billion over the next four years, and $6.5 billion in the medium term.

-AAP