In a lengthy late night Senate sitting on Wednesday, the government changed its bill to prevent it from failing, opting to instead extend the scheme in areas of South Australia, Western Australia and Queensland.
Labor social services spokeswoman Linda Burney has hailed it as a win, and says the opposition supports income management if it's voluntary.
"That's where people realise they've got a problem, realise they need help and will cooperate," she said on Thursday.
But when it's mandatory - a blanket application - it is discriminatory and we will not be part of that.
The new-look bill will head to the lower house for the final tick of approval.
Government minister Keith Pitt's Queensland electorate covers communities using the cards.
He says it's tough but necessary, using anecdotal evidence to argue the program helps ensure money is spent on rent and food.
As part of the last-minute changes, more than 20,000 people in the Northern Territory and Cape York can volunteer to move onto the card from another income management scheme.
The controversial program appeared on track to be scrapped on Wednesday evening when Independent Senator Rex Patrick signalled he would vote against it.
But Centre Alliance Senator Stirling Griff helped pave the way for the amended version to pass 34-33 in the upper house, by dodging the vote.
He had promised to oppose the original bill and his lower house colleague Rebekha Sharkie voted against it.
Up to 80 per cent of welfare benefits are quarantined on the cards so money cannot be spent on alcohol, gambling or withdrawn as cash.
Welfare recipients in Ceduna in South Australia, the East Kimberley and Goldfields in Western Australia, and Bundaberg and Hervey Bay in Queensland are on the cards.
Social Service Minister Anne Ruston revealed the majority of people on the cards in WA and SA were Indigenous.
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.
She said people needed job services, training, medical facilities and counsellors alongside the card.
The first trial sites started in early 2016, meaning some people 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.