A leaked letter from Treasurer Joe Hockey to state and territory treasurers has confirmed that removing the goods and services tax on tampons and other sanitary items will cost $120 million over four years.
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Mr Hockey has confirmed the change remains on the table, though he has cautioned there needs to be unanimous agreement from the states before the change goes ahead.
The leak of the letter comes as the Treasurer prepares to address a PricewaterhouseCoopers tax reform forum on Wednesday in which he will set out the six key principles that will guide the government's pursuit of tax reform.
Significantly, Mr Hockey says the government must address bracket creep - the process by which people are pushed into a higher tax bracket because of inflation - as "it is better to leave money in the pocket of the taxpayer".
The estimated $120 million cost to the budget bottom line is $30 million less than the $150 million estimated by the Parliamentary Budget Office, which provided modelling to Labor that showed a cost of $35 million in 2017-18, and then $40 million in the following three years - a total of $150 million.
In the note to state treasurers, Mr Hockey said that the Treasury's "indicative estimate" of removing the impost was a $30 million a year for four years.
"There is significant community interest in debating the merits of making these products GST-free and I would welcome the opportunity to discuss these issues with you," he said.
"Following your consideration, I have listed this matter for discussion and resolution at the forthcoming Council of Federal Financial Relations meeting."
On Tuesday, Mr Hockey confirmed he had written to state treasurers about the issue and that it would be discussed at an August meeting.
"It's in their court and we're waiting to hear back from them," he said.
His suggestion was at odds with Prime Minister Tony Abbott, who said scrapping the GST on tampons was "not something this government has a plan to do".
The proposal has drawn support from federal Labor, but has been lambasted by economists and some of Mr Hockey's colleagues, who believe the government should be using the tax reform process to either broaden the base of the GST or raise the rate.
In the speech to PwC, Mr Hockey will say that tax reform must promote a stronger economy building jobs, growth and opportunity while also updating "1950s rules that simply don't fit with the modern, globalised economy".
In addition, "tax changes must encourage workforce participation and ensure families control their own money".
The Treasurer also says that tax reform must encourage innovation and ensure that people do not pay tax until they have earned income.
And finally, Mr Hockey says the "revenue raising capacity of each tier of government should be aligned to responsibilities of funding and service delivery", a reference to the vertical fiscal imbalance that exists between the states and the federal government.
Labor treasury spokesman Chris Bowen said the lower cost of the proposal to remove the GST meant that there were "no more excuses" to stop the proposal going ahead.
"It's time Tony Abbott got serious about removing this unfair tax on these essential items," he said.
"The Abbott government needs to take this unique opportunity to right a policy wrong and ensure the Commonwealth removes the GST from tampons and pads without decreasing GST revenue to the states [through the additional Netflix revenue]."
The so-called Netflix tax is expected to raise $350 million over its first two years.
