The federal government's proposed media reforms are in limbo after rejecting a push from the Nick Xenophon Team for tax subsidies to support public interest journalism.
The trio of Senate crossbenchers is calling for tax write-offs for media outlets with a turnover of up to $25 million a year.
Under plan they would receive a tax offset for the first $2.5 million spent on journalists and producing content, similar to arrangements for research and development write-offs.
Senator Xenophon said the proposal would give a shot in an arm to small and medium sized outlets and rural newspapers.
He said it would encourage them to employ more reporters and claw back some of the 3000 jobs lost since the global financial crisis.
"There are many other countries in the world that provide assistance and (tax) breaks to journalism because in the western world we understand the importance of journalism as a bulwark of our democracy," Senator Xenophon told reporters.
The arrangements would only apply to bona fide operations with a minimum floor of $300,000 so it would exclude people operating a blog from their bedroom, Senator Xenophon said.
But the government is worried about the costs involved.
"The government doesn't look at these things with blank cheque books," Treasurer Scott Morrison told Sky News.
Communications Minister Mitch Fifield questioned whether it is appropriate for tax subsidies to benefit foreign multinational media organisations.
Senator Xenophon estimated his "fairly modest proposal" could come with a $40-$50 million price tag per year. But he pointed out more journalism jobs equated to personal income tax down the line.
Senator Fifield said the government had reached in-principle agreement with the Nick Xenophon Team on four other measures.
* An Australian Competition and Consumer Commission inquiry into the impact of the new digital environment on media.
* Review into the reach of Australian broadcasting services in the Asia Pacific region.
* Further extension for community television.
* Enhanced local content in smaller regional markets.
The government needs 10 extra votes to get its bill through the Senate and already has the support of One Nation's four senators in the bag.
A key sticking point, in the quest to find other votes is the repeal of the two out of three rule, which bars a person owning licences for TV, radio and newspapers in a single market.
Most non-government parties have expressed concern about the change, saying it could reduce Australia's media diversity, which is already concentrated in a few hands.
Senator Xenophon and Senator Fifield said talks would continue in good faith.
