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Community groups wanting a share of new government funding must be big enough to be able to scale up, Mental Health Minister Matt Doocey says.
Rainbow groups were among those saying it was nearly impossible for them to access the new Mental Health and Addiction Community Sector Innovation Fund.
The Rainbow Support Collective said the $250,000 minimum required to match government money would almost certainly exclude its members who didn't have that level of money.
"Even for those of us with the largest cash reserves and largest philanthropic grants, this is a near insurmountable barrier.
"Many smaller organisations - especially ones localised in smaller communities - will miss out entirely," the collective said.
It was also concerned the rainbow population was not named as a priority group.
"This fund is stated to close that gap and enable peer lead and grass roots community level organisations to expand their service, however the fund is structured in a way that prohibits rainbow community led services from accessing it."
Doocey told Morning Report the fund was not a silver bullet but "one of a number of initiatives".
Mental Health Minister on new Mental Health and Addiction Community Sector Innovation Fund
"We're looking for organisations that say we are receiving considerable philanthropic funding at the moment, if you were to match fund that we have a workforce ready to go, we can scale up."
He said such matcher funding was requested by the community.
"They're not necessarily wanting to take on significant government contracts and the compliance that comes with that."
The $250,000 minimum was meant to ensure the organisations would have the capacity to scale up with the additional funding, Doocey said.
Any government fund had criteria and "some people fit the criteria, some people don't", he said.