So the tiny Pacific territory's leaders say they were shocked to discover the federal government is planning to strip the historic island of its parliament as the price of entry into the mainland's taxation system.

To add insult to injury, Norfolk's Chief Minister says, the Commonwealth is planning to snuff out the island's micro-democracy, "without meaningful consultation", in the centenary year of the territory's handover from Britain to Australia.

The islanders are proudly Australian but fiercely independent and their Chief Minister Lisle Snell says they fought too long and too hard for their quirky form of local government to return to the "colonialism" of direct rule from Canberra.

They fear they would share the fate of Christmas and Cocos Islands who complaining ever more loudly about being ignored by the distant officials in Canberra who run their lives and offer second-rate democratic rights compared with mainlanders.

Federal territories minister Jamie Briggs was coy on Thursday about his plans for Norfolk, simply saying that "a range of options" was on the table for the future of the island.

Everyone agrees that something must be done about Norfolk Island. Its tiny economy does not raise enough tax to pay for the services its 2300 residents consume and its government must fund school and a hospital as well as roads, rates, rubbish and even dole and welfare payments.

Ever since the island needed a federal bailout in the wake of the global financial crisis in 2010 its administration stays afloat on federal government subsidies of up to $8 million a year.

The Norfolk Island Territory Government wants to surrender much of its revenue raising power – it levies a 12 per cent GST – and join the mainland taxation system, vying for its slice of the national GST pie like any other state or territory.

But after coming to Canberra on Thursday to plead their case, Mr Snell and his Finance Minister Tim Sheridan said they were "aghast" to find Mr Briggs had put before cabinet a new model of governance that has no place for the island's Legislative Assembly.

"It is clear the federal government intends to remove the current Norfolk Island self-governance and take away the voting rights of Norfolk Islanders in the process," Mr Snell said.

"I believe the federal government intends to impose on Norfolk Island a slightly modified Christmas Island model, which has proven to be dysfunctional, inoperable and does not allow for community representation and input above local government level.

"My concern is that it will take us back to colonialism."

Mr Briggs said the Government was "considering a range of options to ensure that Australians living on Norfolk Island are treated fairly".