HUNDREDS of small country towns have been stripped of their official status.

And more towns will learn their fate within weeks when 2011 Census data is applied to a formula that decrees centres with less than 200 people are no longer towns.

Local residents' reactions to the loss of their "township" has ranged from anger to fear, with concern the decision may affect consideration for government grants.

"If someone tried to tell one of our towns which only had 40 people in it they weren't living in a town any more, they (had) better be prepared to defend themselves," Yarriambiack Shire councillor Helen Ballentine said, outraged by Woomelang's loss of status.

Town officials now want the Australian Bureau of Statistics to discover a new "name" for their community if they no longer qualify as towns.

Villages, boroughs and hamlets have already been suggested, or simply small towns.

The ABS has updated a new statistical standard to define an urban centre locality, or town.

Populations below 200 no longer qualify. The "town" must also have an "identifiable urban core" and no fewer than 200 people per square kilometre.

So towns such as Balmoral in the Western District, which claims a district population of more than 300 but is found to have less than 200 people living in the actual town, is no longer officially a town.

There is even more confusion about the status of a resort town, such as Seaspray on Gippsland's Ninety Mile beach, which has about 180 permanent residents but welcomes thousands more in summer.

An ABS spokeswoman said there was no separate classification for towns under 200. "Those localities merge into rural and farming populations," she said.

This year's reigning Community of the Year in the 2012 Regional Achievement and Community Awards, Girgarre near Shepparton, has slipped under 200 people this past decade.

June Smith, from the Girgarre Development Group, said rural areas were confronting their challenges but did not believe their town was any different "because someone in Canberra says it is".

The long drought, closure of the town's dairy factory and an ageing population have hurt Girgarre.

"We believe we are turning that around and for someone to say we're no longer a town doesn't help much," Mrs Smith said.

"Where does it leave our school, our hall, do we fall off the government radar?"

Balmoral Progress Association's chairman-elect Gerard Watt disputed the town's population was under 200 but said a recent swing to cropping in the area away from grazing reduced the demand for labour.

"Farms are getting larger and more efficient and we do have a lot of properties in the town owned by absentee owners," he said.

Mr Watt said Balmoral had a very active community who would defend their town.

Residents of Erica, in West Gippsland, said a lot of local homes have been purchased as weekenders by city people who would offer their metropolitan address at Census time.

Long-time resident Jim Micah said Erica, like most other country towns, struggled to retain its young people who often left for higher education.

"You can buy a good house here for $200,000 and people come here from the cities for the peace and quiet," Mr Micah said.

The Mallee is suffering the biggest population declines through the increasing size of broadacre farms, with Woomelang falling from 290 people in 1981 to about 180 now.

"These communities are very proud of their towns," councillor Helen Ballentine said.

"It is an insult to these people to take away their status ... their towns give them their identity."

Councillor Malcolm Hole, who represents Gippsland on Rural Councils Victoria, said it was passion that made a town, not numbers.

"The heart and soul of people make the towns," he said.

"I am deeply suspicious of the long-term impact of this decision because it may be used as a reason not to fund projects."