A review into the distribution of GST will benefit everyone, according to the federal government, but some state leaders claim the move is a political one designed to bolster its support in Western Australia.
Treasurer Scott Morrison has ordered the Productivity Commission to review how the GST distribution among the states and territories impacts national productivity and growth.
The Commonwealth Grants Commission, through the existing system of horizontal fiscal equalisation, recommends the distribution so each state ends up with a comparable level of government services.
It has been in place since the GST was introduced in 2000 and there is a three-year lag in the determinations.
Mr Morrison says there's a suggestion the approach creates disincentives for reform, including moves to enhance revenue raising or drive efficiencies in spending.
"In commissioning this inquiry, the government seeks an examination of the issues underlying these claims," Mr Morrison said in a statement on Sunday.
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"It is important for Australia's future prosperity that our system underpinning Commonwealth-State financial relations supports productivity, efficiency and economic growth across the country."
Finance Minister Mathias Cormann says while the federal government will explore the possibility of a GST floor, it's a separate issue to the share distribution review.
Western Australia has been particularly critical of the distribution system because it is getting just 30 cents in the dollar of GST revenue due to the state's prior strength from the mining boom.
WA premier Mark McGowan said while he was "very pleased" about the inquiry, the federal government needed to act on the findings as soon as they were handed down.
"We can't wait any longer for action on the GST," he told reporters on Sunday.
"They need to take into account that we have put in major resources over many decades into developing our mining industry and it's not just a gift from nature to the people of WA."
South Australian Treasurer Tom Koutsantonis accused the federal government of using the review to improve their support in WA, saying tinkering with the system was purely political.
"Every South Australian should know that this decision is all about taking money our of your pockets and giving it to someone else," he said.
SA receives about $1.30 for every dollar of GST raised.
His sentiments are shared by Queensland premier Anastasia Palaszczuk, who believes WA would end up with more of the pool than the Sunshine State.
The NSW government has welcomed the distribution review, with premier Gladys Berejiklian saying the state loses about $18 billion through allocations.
"We've always said a fairer GST model would be based on per head of population," she said.
The review is strongly supported by the Minerals Council of Australia, with chief executive Brendan Pearson arguing the system will put a brake on economic growth and jobs if it remains unchanged.
The Productivity Commission is due to report back to the government on January 31, 2018.
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