The federal government's cuts to sports spending will be felt mostly in Canberra, even though the Australian Institute of Sport was spared a severe pruning.
The government will also shift its focus away from community sports and fitness in favour of elite athletes.
The decision coincides with the release of a new international report which found Australian children were among the world's least active.
The study, which compared the physical activity of 15,000 children from 15 countries, found more than 80 per cent of Australians aged five to 17 failed to get one hour of exercise a day, yet more than 70 per cent spent more than two hours a day watching an electronic screen.
Last week's budget papers confirm the Australian Sports Commission's workforce, which includes AIS staff, is expected to shed 137 full-time-equivalent jobs over the coming year.
The commission employed almost 700 people last year, three in four of whom were based in Canberra.
Its chief executive Simon Hollingsworth said on Wednesday the Abbott government's efficiency drive would not affect athletes bound for the 2016 Rio Olympics, and he was confident those sportspeople would receive more, rather than less, support in the lead-up to the Games.
Instead, his agency's corporate operations – which are based in the ACT – and staff in the soon-to-be-abandoned Active After-Schools Program would absorb the brunt of the budget cuts, he said.
"Preserving sport funding at current levels, and supporting athletes and sports towards the Rio 2016 Games, remains a priority," Hollingsworth said.
The budget papers also show cuts to amateur sports funding will help protect financial support for elite performers.
Programs that encourage the general community to take part in sport and exercise will lose $6.3million in 2014-15 (a cut of 8.6 per cent in real terms), while support for sports excellence will be trimmed by just $3.3million (a 4.7 per cent cut in real terms).
Mr Hollingsworth said the commission would save money by setting up a centralised, cost-effective travel system for athletes and staff, and by improving procurement practices.
The AIS would also examine sharing its facilities with athletes from other nations, he said.
Four years ago, the Crawford review of sports spending criticised governments for focusing too much on winning Olympic medals rather than improving the fitness of all Australians.
Former world marathon champion and former AIS director Rob de Castella said on Wednesday that community sport was crucial, and not only for its health benefits.
"It's got a role to play in stopping obesity but it also has an enormous contribution across a whole range of social issues," he said.
But he didn't believe Australia should be forced to choose between elite sports funding and amateur investment, saying they were equally important.
"I think they're different sides of the same coin and you can't have one without the other," he said.
Although the budget cut overall funding on community sports programs, Health Minister Peter Dutton said the government would spend about $40million a year on a new "sporting schools initiative" to encourage students to exercise before, during and after school.
The initiative would extend to almost 6000 schools and sports groups across the country.