The ACT has withdrawn from testing the online system of the National Assessment Program Literacy And Numeracy due to concerns about the potential for technical issues.
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The territory was expected to lead the nation in trialling the new system which will be implemented in every school in Australia by 2019.
Acting Education Minister Gordon Ramsay announced the ACT would no longer participate on Wednesday following similar announcements from Victoria, Western Australia, South Australia and Queensland.
This means no schools will use the system this year with students in grades three, five, seven and nine to instead complete the literacy and numeracy tests in May using pen and paper.
"We need to administer the assessments in a way that enables learning to continue productively and without creating unnecessary stress for children, while providing the most value," Mr Ramsay said.
"The technical systems required for NAPLAN online testing are not ready and there is too great a risk that problems with it could arise.
"We won't roll out NAPLAN online testing until we have confidence that the system is also ready."
An ACT government spokeswoman added: "In the ACT, we were confident that our schools had been comprehensively prepared for NAPLAN Online."
The Australian Curriculum, Assessment and Reporting Authority, which administers NAPLAN, said confidence in the readiness of the online platform to deliver the tests was "of the utmost importance".
"While it is disappointing that the initial 10 per cent [of] schools in the five states and territories that had planned to begin moving online in 2017 now will not be doing so, we want NAPLAN Online to be successful for everyone," chief executive Robert Randall said.
"I respect the decision of states and territories to delay the transition to allow more time to gain a greater level of confidence for the move online."
Schools will be able to participate in a readiness test in August and September. Mr Ramsay said the ACT would continue to work towards online testing within the three-year transition period.
