Australia has decided against introducing its own digital services tax, opting instead to wait for global agreement on the best way to handle the revenue of online players, including Google and Amazon.
The choice comes after business groups and others warned the federal government against creating its own tax for the digital economy, in their responses to a discussion paper.
"Given this feedback and recent international developments, the government has decided to continue to focus our efforts on engaging in a multilateral process," Mr Frydenberg said on Wednesday.
The United Kingdom and France are among countries to have unveiled plans in the past six months to tax the revenues of the biggest internet-based companies.
But Mr Frydenberg says Australia will wait for an international consensus.
The government expects such agreement will come through global forums such as the Organisation for Economic Co-operation and Development and G20.
The OECD is due to host a discussion on the issue in May and release a final report in 2020.
Shadow assistant treasurer Andrew Leigh said the announcement comes from a government that has "dropped the ball" on multinational tax avoidance.
"The government's been hopeless on multinational tax," he told AAP.
Labor is not taking a digital sales tax to the federal election itself, but Mr Leigh said it has a comprehensive plan to crack down on tax avoidance and tax havens, including closing several loopholes.
The development comes exactly a year after then-treasurer Scott Morrison urged his G20 counterparts to work together to ensure online giants are properly taxed.
Without such collaboration, the tax system will be "clunky", "clumsy" and won't be well targeted, potentially missing out on the potential growth of the new economy, he said.
"The idea the new economy should be a tax-free environment I think is a nonsense. It can't be a tax-free club," the now-prime minister told Bloomberg on the sidelines of the conference.
