Federal Education Minister Simon Birmingham stared down an attempt by some states for a root-and-branch overhaul of the entire literacy and numeracy assessment program that is accused of stressing out students and skewing the way teachers approach the curriculum.

Instead, ministers agreed to review the way NAPLAN results are reported on the MySchool website to ensure they are "in the public interest" and presented in context.

ACT Education Minister Yvette Berry said the Education Council had taken "a first, albeit small step towards reviewing the effects and unintended consequences" of the controversial testing regime.

"I’ve long held concerns about the reporting and culture around NAPLAN and the league tables enabled by My School – most of all the unfair impact they can have on teachers, students and school communities, particularly in lower income communities," Ms Berry said.

Under the draft terms of reference put to the Education Council, the ACT had proposed a staged approach that would allow for policy change before a more comprehensive final review was handed down while focussing on MySchool reporting as its main priority.

It is understood a number of states and territories had wanted a full-scale review of the test itself "in one go" while others had pushed back against any form of evaluation at all, particulalry with NAPLAN Online just getting off the ground. The final compromise barely got over the line.

"Although it’s not the broad review many of us had hoped for I’m glad education ministers have at least agreed to terms of reference on a way forward," Ms Berry said.

The ACT's draft terms of reference, which were understood to have drawn some criticism for their wording, were rewritten and pared back on Friday, but the review will still examine how MySchool reporting stacks up against its founding principles, first set out in 2009.

It will also look at the way NAPLAN is used to "inform teaching" in schools when an independent reviewer is called in to carry it out.

Senator Birmingham, who has defended the tests for grade 3, 5, 7 and 9 students as an "important check", characterised the review as "narrow" and said he would not truck any attempt to dismantle the exam itself.

"Some states wanted to engage in a review of NAPLAN that was essentially going to simply do what the unions have demanded and lead to the dismantling of basic literacy and numeracy assessment across the country," he said.

Australian Education Union president Correna Haythorpe labelled the outcome "disappointing", declaring NAPLAN a "failed testing regime".

Earlier this month, Julia Gillard defended the MySchool website she created while education minister, saying it offered "radical transparency" for parents and arguing the more data published, the better.

Senator Birmingham is also in favour of offering parents "rich data", adding early feedback from NAPLAN Online launch this year indicated it had been "a roaring success" with very few glitches to report.

The government has backed the Gonski 2.0 report released earlier this year which recommended the development of more "formative assessment tools" where smaller but more frequent tests could help teachers track student progress "in real time".

Ms Berry has said this could open the door to different methods of reporting, where the teacher worked more closely with the family, and more emphasis was placed on learning gain.

On Friday, Senator Birmingham accused federal Labor and teachers unions of running a "scare campaign", after opposition spokeswoman for education Tanya Plibersek said NAPLAN was making students sleepless and "sick with nerves".

The MySchool review will report back to the Education Council on its progress by December.

-with Michael Koziol