02/04/2016 2:03 PM AEDT | Updated 15/07/2016 12:51 PM AEST

PM 'Has Nailed His Policy Colours To The Mast', Shorten Says

Matt King via Getty Images
SYDNEY, AUSTRALIA - MARCH 21: The Leader of the Australian Labor Party Bill Shorten addresses the media on March 21, 2016 in Sydney, Australia. Prime Minister Malcolm Turnbull earlier announced his decision to recall parliament early to vote on industrial relation legislation. The Prime Minister said he would call a double dissolution election, to be held on July 2, if the legislation if the bills are not passed. (Photo by Matt King/Getty Images)

The federal opposition has labelled Prime Minister Malcolm Turnbull's backdown over proposed income tax changes as "humiliating" and has promised that a Labor government would never try to slug Australians twice with the tax.

On Friday, Turnbull sensationally dumped his controversial plan for the states to collect income tax directly after a lack of support from state premiers at the latest Council of Australian Government (COAG) meeting.

The Prime Minister earlier in the week hailed the plan, that would see states take over the federal government's responsibility for collecting income tax, as a "once in several generations reform" on tax.

Turnbull said the failure to move forward on the proposal was because there was "not a consensus among states and territories to support further consideration of the proposal".

Shorten described the backtrack as an "humiliating farce" for the PM.

"On Wednesday (he said) he had an idea that was going to be the best reform ever to federation, the crazy idea of double taxation allowing state income taxes to be levied on working Australians only to drop it temporarily by Friday," he told reporters on Saturday.

"The real problem here is that Mr Turnbull wants to move on from the train wreck of this week with his outlandish idea to have double taxation but Australians won't let him move on so quickly. Mr Turnbull has nailed his policy colours to the mast."

Shorten categorically ruled out moves like those floated by Turnbull on income tax if Labor won the election.

The opposition leader made the comments in Adelaide alongside shipbuilders who are calling for the Turnbull Government to hand submarine contracts to South Australia.

Turnbull said the result from COAG clarified that the states did not want to have any part in levying income tax.

"It is really up to the states they have always said their their problem is they don't have access to a big tax base," he told reporters in Sydney.

"When they were given that opportunity to take responsibility of raising a portion of the income tax receipts they did not want to pursue that idea at all."

He said states should live within their means because the federal government was not prepared to raise income taxes.