A remote Pacific island whose residents are descendants of the swashbuckling British sailors and Tahitian women immortalised in the "Mutiny on the Bounty" movies is set to lose its right to self-rule.

Norfolk Island, 1,500 kilometres east of the Australian coast and settled by the ancestors of Fletcher Christian and other Bounty mutineers in 1856, has governed itself since 1979.

But it is effectively bankrupt and Canberra said it would introduce legislation next week to scrap the Australian territory's parliament.

If it passes, the island's legislative assembly will be temporarily replaced by an advisory council, before local government elections in 2016.

Personal and business tax will be introduced from July 2016, and residents will in return be able to access social security and healthcare benefits and services enjoyed by other Australians.

Assistant regional development minister Jamie Briggs said the changes were long overdue and it was not sustainable to ask a community of just 1,800 to deliver local, state and federal services.

He said the infrastructure on Norfolk Island was run down, the health system not up to standard and laws out of date.

"The community overwhelmingly supports reform and is of the view that the current governance arrangements are not suitable," he said, adding that Norfolk Island was effectively in administration and reliant on Australian bailouts.

"It is diabolical - it is quite concerning that it's been left for so long," he said.

Norfolk Island Chief Minister Lisle Snell said it was unfair to impose such a decision on the tiny outcrop, just eight kilometres long by five kilometres wide and perched on steep cliffs above crashing surf.

"Norfolk Islanders will lose their identity, they will lose their way of life," Ms Snell told the ABC.

Most of the core population are descendants of the mutineers who set Captain William Bligh adrift from British warship the Bounty when they famously fell in love with the South Seas, and its women, in 1789.

The mutiny gained such a romantic gloss that chief mutineer Christian has been portrayed by a series of Hollywood heart-throbs over the years, including Errol Flynn, Clark Gable, Marlon Brando and Mel Gibson.

Christian and eight other mutineers first made their home on Pitcairn Island with a group of Tahitian women, but their descendants moved nearly 6,000 kilometres to Norfolk Island in 1856 when Pitcairn became to small for them.