Western Australia has convinced the federal government to consider changing the GST formula but the plan faces stiff opposition from other state premiers.
And the federal Labor opposition has slammed the idea to phase in a floor on how low a state's share of the GST can go as "federalism on the run".
Prime Minister Malcolm Turnbull announced the proposal to much applause at the WA Liberal Party state conference on Saturday.
WA's share of the GST has dropped sharply in recent years to about 30 cents back for every dollar it generates, which federal Finance Minister and WA senator Mathias Cormann describes as "completely inappropriate and unsustainable".
Under the formula used now, there's a lag of about three years before changes in a state's financial situation results in compensatory changes to its proportion of the national consumption tax.
Under the federal plan, a minimum percentage floor of GST revenue would be gradually introduced, increasing WA's share to make up for lower iron ore prices cutting the amount the state collects in mining royalties.
A gradual phase-in would mean no other state would be disadvantaged because they wouldn't lose compared to the projected GST share over that time, Senator Cormann told Sky News on Sunday.
He didn't nominate what the floor would be, but noted past Council of Australian Governments meetings had floated a base of at least 50 per cent.
WA premier Colin Barnett hopes the percentage floor for the state would end up at about 75 cents from every dollar raised.
Mr Barnett was, unsurprisingly, delighted with the announcement, telling reporters at the party conference it would provide long-term security and stability in revenue and allow WA to plan for health, education, roads and other spending.
Federal shadow treasurer Chris Bowen dismissed the plan as a prime minister thought bubble.
"He's got no credibility on federalism and tax and now he says he's got an idea to change the GST distribution where no one loses and everyone wins," he told AAP.
Liberal senator Linda Reynolds believes such a change would be "unequivocally good news" for all states - not just her home of WA - and particularly for NSW, which faces a drop in GST share in coming years.
But Labor premiers from Queensland and South Australia are sceptical.
Sunshine state leader Annastacia Palaszczuk said the plan appeared to be aimed boosting revenue for WA ahead of the next state election and was "absolutely discriminatory".
SA Premier Jay Weatherill said numerous studies had showed the existing formula was the fairest and most efficient.
Tasmania's Labor opposition is fuming, arguing Western Australia shouldn't be demanding more money from Canberra simply because it wasted billions of dollars during the mining boom.
"Malcolm Turnbull is planning to give more to WA and that means Tasmania will be the loser," opposition leader Bryan Green said in a statement, adding his state could lose "tens of millions of GST dollars".
NSW Premier Mike Baird will wait to see full details of the plan ahead of expected talks at the next COAG meeting.
