Scott Morrison said there was no doubting the teenager's bravery during World War II, but reconsidering the honour would create a two-class system.

"This is an issue that is a very difficult one," Mr Morrison told 2GB radio on Friday.

Sheean died in 1942 when the HMAS Armidale was sunk by Japanese bombers in the Timor Sea.

The 18-year-old strapped himself to an anti-aircraft gun as the vessel went down and is credited with saving the lives of 49 crew.

Tasmanians have for years pushed for Sheean to be recognised with the country's highest wartime honour.

A military tribunal recently reviewed whether Sheean should be awarded VC after a 2013 inquiry found his actions didn't meet the threshold required.

The review did not uncover any new evidence and the appeal was effectively quashed.

Mr Morrison will not reconsider his case.

"That doesn't mean to say that it says anything about Teddy's bravery, he is an extraordinary Australian and an extraordinary Tasmanian," he said.

"But at this point, one can only conclude the same way that the chief of the defence force and others have. That's reluctant but it's where the situation sits."

Australian Associated Press