Various state-based and national reports into Australian local government have conclusively demonstrated that the problem of financial sustainability is widespread amongst local councils, especially in non-metropolitan areas. The main impact of this financial distress has fallen on local infrastructure and the magnitude of the problem is now so large that only massive injections of funds from higher levels of government can resolve the problem. However, some scope also exists for local councils to improve the efficiency of their operations. While structural reform in the guise of amalgamation has largely failed to generate efficiency gains, all state-based and national inquiries into local government saw significant potential in shared service models. This paper seeks to augment the existing embryonic literature on alternative models of local government suited to Australian circumstances by proposing a new two-tier model of local governance that can enhance regional cooperation between local councils. The model seeks to preserve local democracy and local representation while simultaneously encouraging shared services in those areas of service provision that exhibit economies of scale and scope economies.