Screen Australia, the organisation responsible for a significant number of Australian films, could lose half its funding, according to the Commission of Audit.

The industry body could also be merged with the Australia Council, the country’s main arts funding organisation.

The commission of audit includes a recommendation that the residual 50% funding is directed specifically to Australian content, including films with "an historical perspective".

The Australia Council would be merged with other arts related bodies, including the Australia Business Arts Foundation, to create a single Arts Council.

Major museums, such as the National Gallery, the National Museum and the National Portrait Gallery, would remain untouched.