WA and Canberra to sort out GST issue

A meeting of the nation's leaders has left it to the federal government and Western Australia to find an answer to the state's GST revenue shortfall.

The Council of Australian Governments meeting in Canberra on Friday decided the merits of the distribution scheme should be considered in the white paper on reform of the federation.

The commonwealth and WA are having bilateral discussions about how best to address the impact of a $300 million drop in the state's GST share in 2015-2106.

WA Premier Colin Barnett was disappointed at the meeting's outcome.

"The elephant in the room is GST and that's what this COAG has been significantly about," he said, adding the leaders had an opportunity to show some willingness to achieve reform and it wasn't there.

"So I don't know how we're going to reform Australia and modernise it when we can't tackle an issue which is so inequitable."

Tasmanian Premier Will Hodgman said the future of the federation would have been undermined if COAG had agreed to make allowances for WA at the expense of other states.

In welcoming further discussions about reforms to the federation, he said that needed to be done outside the annual argy-bargy of the GST distribution.

"The political bun fight serves no great purpose," Mr Hodgman said.

Mr Abbott flagged putting a floor under GST distribution, so that every state knew the minimum amount they would receive.

He also ruled out any "free gifts" for any state or territory to overcome one-off shortfalls.