The record offer would have delivered professional rates of pay for paramedics and an average 19 per cent pay rise, the state government said.
But it was rejected during mediation with the Health Services Union on Friday morning.
"We are bitterly disappointed the HSU has walked away from this," Health Minister Ryan Park said.
"Our state now faces the real possibility of a collapse of our triple-zero service.
"Make no mistake, this strike action will place lives at risk."
HSU members will stop work on Friday afternoon to meet with union leadership and discuss the stalemate, which has dragged on for more than eight months.
Pointing to high salaries offered in ACT, Queensland and Victoria, paramedics have campaigned for a rise in their pay of between 20 and 45 per cent.
The Labor government said its latest offer would have put local salaries on par with those in Queensland, based on take-home pay, by 2025.
"This is what they have asked for," Mr Park said.
"The offer would move our paramedics from among the lowest to among the highest compared with other states."
The union says hundreds of paramedics have resigned in the past six months as they grapple with the cost of living.
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