The government is considering a new tiered postal system where customers pay a premium for next-day delivery.
Australia Post wants to charge customers extra to deliver letters within a designated time - for example the next day - while regular mail could take longer.
The government-owned postal service says losses due to plummeting demand in its letter business could overwhelm the entire company if changes aren't made.
Communications Minister Malcolm Turnbull says the government, which has to approve changes to postal services, is reviewing the request.
"It's under consideration," Mr Turnbull told the Nine Network on Friday.
Australia Post must earn $3 for every parcel delivery to offset the decline in the letter business.
"The profits are swamped by the losses in the letter business," Mr Turnbull said, adding the only option was to cut costs.
Details of proposed changes came as the postal service reported a 34.5 per cent slide in full year profit to $116.2 million.
Profit was pulled back by losses of $328.4 million in the mail business amid a drop in letter volumes and higher costs.
Deputy Labor leader Tanya Plibersek warned the government not to forget about people in regional and rural Australia when making a decision.
"We've got to keep in our minds that it's a big country and we've got a lot of people who live in remote areas," she said.
"We don't want to do anything that cuts them off."
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