The decision has been slammed by anti-merger groups, as well as Nationals MLC Wes Fang and Member for Wagga Dr Joe McGirr.

Local government minister Shelley Hancock announced on Tuesday that the boundaries of the two council areas would remain in place.

The former Tumut and Tumbarumba Shire councils, and former Gundagai and Cootamundra Shire councils, were both forcefully amalgamated in May of 2016. Ever since, communities in both LGAs have called for a demerger to take place.

Ms Hancock enlisted the Boundaries Commission to examine proposals to demerger each LGA in February 2020. The commission held public hearings in each town and compiled a report with their findings and recommendations for the minister, which was only revealed to the public on Tuesday.

The commission recommended that Snowy Valleys council demerge with conditions, and that Cootamundra-Gundagai remain amalgamated - however, there was a dissenting report from two commissioners.

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"The reports do not provide a clear consensus on the issue of demerging and do not provide me with the necessary confidence to make these important decisions," Ms Hancock said when announcing her decision that both councils remain merged.

"This provides both councils with certainty and a plan for the future."

Ms Hancock has also announced a independent statutory review into the Boundaries Commission itself, examining "the effectiveness of the membership composition", as well as the commissions functions and processes.

Gundagai doctor and chairman of the anti-merger group Council in Exile, Dr Paul Mara, said that the ministers decision is "disgusting" and "doesn't reflect the will of the people".

"The failure to demerger will increase costs for all ratepayers," he added.

"We'll be fighting it all the way."

Similar sentiments were shared by Neil Hamilton of the group Save Tumbarumba Shire (STS), who said the town is not giving up on a demerger.

"We need a clear, open and transparent discussion of the analysis within the Boundaries Commission report," he said.

"The overwhelming majority of people in the former Tumbarumba Shire want to demerge and want their council back."

Mr Hamilton said that STS was not personally informed of the ministers decision, which he found "appalling".

"The minister needs to explain personally why she hasn't agreed to [the demerger]," he said.

Mr Hamilton is hopeful that the newly-elected council in September will push for a demerger from within, which is now a possibility under the Local Government Amendment Act that was passed in May.

Wagga-based Nationals MLC Wes Fang labelled the ministers decision as "poor".

"We had an independent body tasked with, and instructed to, look at the demerger issue," he said.

"The independent umpire made a decision and the government should accept the umpire's decision on this and demerge the council, given that is what the community wants.

"For the Minister to set aside the decision and shift the goalposts after an adverse determination, is wrong."

Mr Fang said he will "back the community", adding that the mergers occurred before he was elected and his history with Tumbarumba and the wider Snowy Valleys precedes his time in parliament.

"At the end of the day the government set the guidelines for what needed to be done to enable a demerger and the independent umpire made the call. We should follow that," he said.

"That is what democracy is all about and I will be raising this with the Deputy Premier and my National Party colleagues."

Independent Wagga MP Dr Joe McGirr said he has written to the Premier expressing his "bitter disappointment at this decision", asking her to overturn it.

"This feels very much like the city kicking the country. It feels like the government is ignoring its regional base," he said.

"The Coalition is supposed to be governing for the whole state, but it seems like we have the Liberals disregarding the views of their regional partners."

Dr McGirr said that the minister has ignored the "clear majority" decision by the commission, instead choosing to instigate a review.

"This is not just shooting the messenger. This is wiping them out entirely. It sends a clear message to anyone else who wants to disagree," he said.

"There should, at the very least, be a detailed public response from the government to the majority report."

The Wagga MP acknowledged the Local Government Amendment Bill and the new avenue it has opened for a demerger to be pursued.

"But it is almost farcical that the approaching local government election means a newly elected Snowy Valleys Council will be left with pursuing demerger action which, if successful, would ultimately mean elections are needed in not one, but two, newly formed local government areas," he said.

"Common sense suggests that the best course of action would be to begin the demerger process now."

NSW Labor has also condemned Ms Hancock's decision, with Shadow Minister for Local Government Greg Warren saying the government has "used every excuse under the sun as to why these councils shouldn't be allowed to demerge."

"For once the Minister needs to listen to these communities and allow them to have a referendum so they can decide whether they want to stay together or split," he added.

Duty MLC for Cootamundra and Shadow Minister for regional NSW, Mick Veitch, said that both communities are "distraught".

"There was a glimmer of light at the end of a long and dark tunnel when the (boundaries commission) was asked to look into the demergers," he said.

"However today's announcement is a terrible slight on all of the communities in these two council areas.

"They should be provided with an opportunity to chart their own destiny."

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