The Prime Minster has proposed states and territories could be able to levy their own income tax. Malcolm Turnbull said the idea would be discussed at this week’s Council of Australian Governments (COAG) meeting.

“This is the beginning of a journey. What we are talking about is the most fundamental reform to Federation in generations,” Mr Turnbull said.

At the moment, the federal government collects all income tax, but under the new proposal it would lower the amount it collects and the states and territories would levy an additional percentage.

UOW Labor slammed the idea.

“Mr Turnbull turning back time on taxes is as much of a return to the dark ages as Mr Abbott reinstalling knights and dames,” UOW Labor President Caitlin Roodenrys said.

Ms Roodenrys called the move a “band-aid fix for cuts inflicted by the Liberal government in the first place”, and that it would leave smaller states without enough money to fund hospitals, schools and transport.