The controversial Morrison government program appeared on track to be scrapped when independent Rex Patrick signalled he would vote against legislation in the Senate.
But the coalition changed its own bill to give trials in South Australia, Western Australia and Queensland a two-year extension, flipping a crucial vote.
SA Centre Alliance Senator Stirling Griff had promised to oppose the original bill and his lower house colleague Rebekha Sharkie voted against it.
But Senator Griff dodged voting, paving the way for an amended version to pass the upper house 34-33 in the early hours of Thursday.
As part of the deal, more than 20,000 people in the Northern Territory and Cape York won’t be automatically moved onto the card from another income management scheme.
The government passed a separate amendment to make the transition voluntary.
People on the cashless debit card have up to 80 per cent of their welfare benefits quarantined so the money cannot be spent on alcohol or gambling.
The trial sites are Ceduna in South Australia, the East Kimberley and Goldfields in Western Australia, and Bundaberg and Hervey Bay in Queensland.
Social Service Minister Anne Ruston revealed 82 per cent of people on the card in the East Kimberley region were Indigenous.
She said 76 per cent were Indigenous in Ceduna, 48 per cent in the Goldfields and 18 per cent in Bundaberg and Hervey Bay.
Labor and Greens senators labelled the program racist in a series of scathing speeches.
Senator Jacqui Lambie spoke through tears as she reflected on living in poverty on welfare and loved ones struggling with drug addiction.
The Tasmanian independent, who opposed the bill, despaired the government had not taken any action to improve the scheme after starting trials.
“What could have been so great for this country is now becoming heartbreaking,” Senator Lambie said.
She said people in trial sites needed job services, training, medical facilities and counsellors alongside the card.
The first trial sites started in early 2016, meaning some welfare recipients could be on the card for almost seven years when the new expiry is reached.
Senator Patrick criticised the coalition for pointing to an unreleased report about its effectiveness in stopping welfare recipients from drinking, gambling or using drugs.
“We do not have empirical data, any definitive data set that would guide as to whether or not it actually does achieve those particular objectives,” he told parliament.
Centre Alliance’s change of heart drew criticism from Labor and the Greens during a fiery late-night parliamentary sitting.
“Like the cowards you are, you’ve scurried off and you’ve made the deals,” NT Labor senator Malarndirri McCarthy said.
Greens senator Sarah Hanson-Young also blasted them.
“They are gutless, they are up for pathetic deals with the Morrison government and they simply cannot be trusted,” she said.
The bill will return to the lower house to have the amendments approved.
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