Given the significant disparities in health and health related disadvantage between Aboriginal and non-Aboriginal Australians, the application of some notion of equity has a role to play in the formulation of policy with respect to Aboriginal health. Aboriginal and Torres Strait Islander has been abbreviated to Aboriginal. There has been considerable debate in Australia as to what the principles of equity should be. This paper discusses the relevance of the principle of vertical equity (the unequal, but equitable, treatment of unequals) to Aboriginal health funding. In particular, the paper advocates pursuing procedural justice as the basis for vertical equity where the focus is on the fairness of how things are done rather than on the distribution of outcomes per se (i.e. distributive justice). Particular attention is paid to how the principle of vertical equity might be handled at a practical level. Details of the approach used in a number of Australian indigenous communities are discussed. It is concluded that there are strong arguments for pursuing procedural justice under vertical equity particularly when there are cultural differences in the way health is defined and when there is importance attached to indigenous involvement in the health care decision making process.