State and territory leaders have failed to reach an agreement on income tax changes following a meeting with the Prime Minister in Canberra.

Key points: Leaders sign agreement for $2.9 billion in hospital funding until 2020

Leaders sign agreement for $2.9 billion in hospital funding until 2020 No consensus to support further consideration of states levying income tax

No consensus to support further consideration of states levying income tax Prime Minister says income tax change proposal "withdrawn"

Prime Minister says income tax change proposal "withdrawn" Leaders agree to hold domestic violence summit in Brisbane in October

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But they did sign an agreement to receive $2.9 billion in hospital funding to June 2020.

Malcolm Turnbull had advocated for states and territories to levy a percentage of income tax independently, in exchange for the axing of some Commonwealth grants.

But no agreement was reached, with leaders instead moving to consider proposals to share income tax revenue with the states.

Mr Turnbull told reporters in Canberra that more analysis would be done on income tax and the initial proposal was "withdrawn" — just two days after it was unveiled.

"There was not a consensus among the states and territories to support further consideration of the proposal that would enable states to levy income tax on their own behalf," he said.

No additional money will be provided for public schools after the end of 2017 under current arrangements, but further discussions on new funding should be concluded by early next year.

Mr Turnbull said the Commonwealth was not wedded to "the full Gonski", stating that the funding commitment made by the Gillard government was put forward under "barely credible" circumstances.

Northern Territory Chief Minister Adam Giles said the debate on income tax "would have been best if [it] came out in a different format, in a different way".

Tasmanian Premier Will Hodgman said the meeting was "very successful" for his state, but highlighted the risks of the income tax proposal for Tasmania.

"It is important that we have these discussions and we've got to put them on the table," he said.

"We may not always agree and there'll be different perspectives from each and every state but it won't stop us having these discussions about how we can make the Federation work better."

NSW Premier Mike Baird said it was important that tax reform remained on the table.

On health, Mr Baird yesterday argued that $3.4 billion was needed nationally in health funding.

Today he welcomed the Commonwealth contribution, despite it falling short of his request.

"We are positive in terms of what has happened with health," he said.

"Longer term, there remain challenges."

Differences remain over schools funding

West Australian Premier Colin Barnett said funding health was the biggest challenge right across Australia, though highlighted concerns about future funding for schools.

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"We need to look very seriously at defining responsibilities better between the Commonwealth and the states," he said.

"I hope we can have the discussion over the next couple of years and look at facts rather than look at what might be perceived problems."

ACT Chief Minister Andrew Barr also expressed his disappointment on the unresolved issue of schools funding.

"If there is going to be a fundamental change in the Federation, and who has responsibility for education, we can't separate government and non-government schools," he said.

"That's a line in the sand for the ACT. In the simplest of terms, if the states and territories are going to take responsibility for school education, then it should be all schools. We shouldn't have this split between Commonwealth funding."

South Australian Premier Jay Weatherill said states were yet to see a response on schools, saying that although there was "unfinished business", important progress was made.

'We've got to do more' on family violence: Palaszczuk

Victorian Premier Daniel Andrews said leaders "could not dance around" the cuts made by the former Abbott government in 2014, but agreed the hospital funding agreement was significant.

"Whilst an agreement today is a positive, there's no getting away from or getting around or politely explaining away the fact that many billions of dollars will not be flowing to hospitals in my state and hospitals right across the nation as a result of decisions made in the 2014 budget," he said.

But Mr Andrews did praise the work done on domestic and family violence, labelling today's meeting as "productive".

Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. Watch Duration: 7 minutes 17 seconds 7 m Queensland Premier Annastacia Palaszczuk says it's 'game over' on states levying income tax

Leaders agreed to hold a national domestic violence summit in Brisbane in October.

Queensland Premier Annastacia Palaszczuk welcomed the agreement, citing the case of a woman killed overnight in her home state.

"This has got to stop," she said.

"Women are still getting murdered and killed behind closed doors in all different sections of our community. And we've got to do more."

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