The states and territories could get GST revenue based on population with a top-up given to smaller states, under a plan flagged in the government's federation green paper.
The discussion paper was released online on Tuesday after the leaking to the media of several chapters of the 121-page report.
In the section on GST distribution, the paper suggests $6.5 billion would be needed in 2015/16 to top up recipient states if the current formula was changed to a population basis.
"The distribution of the GST would be simpler under this option," the paper says.
The states and territories now get GST revenue based on their capacity to raise revenue from their own sources and the amount of services they provide under a formula called "horizontal fiscal equalisation" (HFE).
The issues paper says the HFE system is "likely to be the best to achieve the goal of equality".
But it says the model also creates "disincentives to pursue politically difficult tax reform and policies to promote economic development".
Another option flagged is leaving the status quo but conducting independent reviews looking at such issues as the treatment of mining revenue and the cost of providing services to indigenous people.
A further option suggests a minimum level of GST revenue to which a state and territory is entitled.
Donor states would not be able to fall below a set proportion of their population share of the GST pool.
If one or more states or territories had a high enough capacity to reach the floor, the GST redistributed to other states and territories would be reduced.
Looking at the overall state of the federation, the paper criticises excessive overlap and duplication of government services.
"It is leading to wasteful expenditure, a constant blame game between governments driving up the cost of public services, and people not really knowing which level of government is responsible for what."
In a previously unpublished section on housing, the paper suggests the option of states and territories taking up full responsibility for funding and delivering housing assistance and homelessness services.
The idea could "deliver better services", it says, but would have to be carefully managed and transitioned over time.
It's one of three suggestions put forward, with another proposing states having responsibility for funding and delivering social housing and homelessness services, while the commonwealth would retain oversight of commonwealth rent assistance.
Funding would continued to be shared, under the third option.
Another proposal considered but not formally put forward would see the commonwealth assuming full responsibility for housing assistance and homelessness policy.
"There would, however, be significant barriers to implementation," it said.
A white paper will be released by the end of the year.
Federal Labor said the paper makes it clear that changes to the GST require the endorsement of the commonwealth in order to proceed.
"Tony Abbott must rule out, in any circumstances, the federal coalition supporting changes to the base or rate of the GST," Shadow Treasurer Chris Bowen told AAP.
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