SNP finance secretary John Swinney told MSPs the proposals to replace the council tax with a 3p local income tax were not possible in the current financial climate.
Mr Swinney said: “The cabinet has decided not to introduce legislation to abolish the unfair council tax and replace it with a local income tax until after the election in 2011.
The move is likely to be welcomed by the Chartered Institute of Public Finance which has long raised concerns that a 3p LIT would leave an estimated shortfall of£750m in tax yield.
Mr Swinney added: “The financial context has changed,it would not be wise, and indeed would not be possible, to introduce a tax reduction of the scale we propose in the face of such swingeing Westminster imposed cuts.
“But make no mistake, this government will fight that election to win a parliamentary majority that backs the abolition of the unfair council tax.”
The Scottish Green Party welcomed the move.
Patrick Harvie (Green) MSP said: "This overdue decision from ministers simply reflects the unavoidable reality of their situation. Parliament's clear view is that neither a local income tax nor council tax is a fit response to the needs of local government finance.”