Labor has raised fears the federal government will have to cut services or raise taxes to pay for its new GST distribution model.
Treasurer Scott Morrison on Thursday unveiled his plan to change the way GST is carved up among the states and territories.
The arrangement would include a $7.2 billion boost to the pool of funds flowing from the Commonwealth between 2021/22 and 2028/29.
Shadow treasurer Chris Bowen said the extra spend left Mr Morrison with two options to meet his commitment of not raising taxes.
"He's either going to increase the budget deficits or cut schools and hospitals," Mr Bowen told reporters in Sydney on Thursday.
"He may believe in magic pudding economics that he can do it all, Australians know better than that."
Mr Bowen wouldn't commit to abandoning the proposed formula if Labor wins the next election.
He wants to further examine the plan and consult with state and territory governments before reaching a final position.
