Problems with indigenous funding in which self-identifying Aboriginals from big cities receive as much money as their counterparts from remote communities has been partly blamed for the Northern Territory Government's financial woes.
Territory Treasurer Nicole Manison made the comments after appearing at an NT Parliament Estimates Committee hearing into public spending.
NT Chief Minister Michael Gunner will be grilled at the committee on Wednesday.
More urban dwellers are self-identifying as Aboriginal, with the 2016 census indicating the number of self-identifying Aboriginal people in NSW and Victoria had doubled since 2001.
Critics of the funding model say that increases the disadvantage suffered by remote Aboriginals, because only a limited amount of the Commonwealth Grants Commission's (CGC) allocation of GST goes to indigenous funding.
"It is important that they recognise that an Aboriginal person's circumstances in a place like Yuendumu or Umbakumba (NT remote communities) is probably going to be very different to an Aboriginal person's circumstances living in Darwin and living in Sydney," Ms Manison told reporters.
"That makes delivering services and overcoming and closing the gap on indigenous disadvantage all the more challenging if you don't have the right amount of GST funding coming in to service that."
Tuesday's hearings also raised questions about the NT Infrastructure Development Fund set up by the government, which had invested $10 million into NT Beverages, a water bottling company that did not yet have a water extraction licence.