NSW plan to scrap stamp duty hits snag as property market booms

A proposal to abolish stamp duty in NSW has hit a snag, with a booming property market likely to provide a record windfall for the state government.

Almost 90 per cent of homes were sold at auction in Sydney on Saturday with the average house now costing $1.2 million, economists are projecting this year's stamp duty receipts to potentially outstrip the record set in 2017.

READ MORE: Stamp duty could be scrapped for NSW home buyers under dramatic new tax model

Treasurer Dominic Perrottet currently has a discussion paper on tax reform to see compulsory stamp duty scrapped in favour of an option of a smaller annual tax.

Under the plan, an average Sydney house owner will pay either $51,000 as a lump sum on the purchase of the property or between $2000-$3000 every year.

Some government MP's are becoming nervous about the proposal, as leaving the tax as it is would significantly help the NSW budget return to surplus.

"State governments rely on property tax, this year will be a big year so why would you change it?" Andrew Wilson of My Housing Market said.

Mr Perrottet has insisted the proposed changes are in the best interest of taxpayers, especially first homebuyers.

"Stamp duty is an impediment to purchase, it's by far our country's worst tax," Mr Perrottet said.

"If you are aged between 30 and 45... there is nobody out there standing up for you, there is no lobby group."

Nine News understands it will take at least 12 months to make any changes to the state's tax system, provided it is given the green light by cabinet and the parliament.