Norfolk Island will be stripped of its parliament under a plan signed off by the federal government.
The federal government has described Norfolk Island's self governance as "diabolical" as it moves to scrap the territory's parliament.
But the island's chief minister says replacing the parliament with a regional council is a disappointing decision that is being imposed on unhappy locals.
The government will introduce legislation next week to strip Norfolk Island of the self governance it has enjoyed since 1979.
The island's legislative assembly will be temporarily replaced by an advisory council, before local government elections in 2016.
Personal and business taxation will be introduced from July 2016, and residents will be able to access social security, Medicare and the Pharmaceutical Benefits Scheme.
NSW will take over education and health services while the Commonwealth will provide police.
Assistant regional development minister Jamie Briggs said on Thursday the changes were long overdue and it was not sustainable to ask a community of just 1800 to deliver local, state and federal services.
The infrastructure on Norfolk Island - 1400km east of Brisbane - was run down, the health system not up to standard and its laws out of date.
"The community overwhelmingly supports reform and is of the view that the current governance arrangements are not suitable," Mr Briggs told reporters in Canberra.
Governments had for decades failed to address the island's problems, and it was now effectively in administration and reliant on federal bailouts.
"It is diabolical - it is quite concerning that it's been left for so long," Mr Briggs said.
Chief Minister Lisle Snell said islanders only found out about the decision through the media.
He rejected suggestions they support the changes, saying 700 residents had signed a petition calling for a vote on self government.
The island's assembly had proposed a territory government model similar to the ACT or Northern Territory.
"No longer will the residents of Norfolk Island be able to have a voice on issues that effect them, such as health, social welfare, policing, education," Mr Snell told AAP.