Property developers in New South Wales have heavily backed a high-profile push to replace the state’s lucrative Stamp Duty system which hits property buyers with an annual flat rate ‘land tax’ paid by all landowners in the state.

Peak developer group Urban Taskforce has chimed-in behind the NSW Business Chamber and New South Wales Council of Social Services who say the Baird Government needs to spread out its property tax base to ease pressure on buyers now copping the brunt of property taxes the groups have branded a “huge up-front financial burden.”

Spearheading the call to reform the NSW stamp duty system, which added a whopping $7.29 billion to state coffers in 2015, is new specially commissioned modelling form consultancy KPMG (PDF) that has put the benefits at an extra $5 billion for Treasury, up to 10,000 new jobs and 1 per cent lift in State Domestic Product.

“State governments have become comfortable with the large income they get from stamp duty on the purchase of homes but they must look at better, more efficient ways to raise funds,” Urban Taskforce chief, Chris Johnson, said.

“Sydney’s housing is among the most expensive in the world and this is partly driven by the various taxes and levies required by governments. A broad based land tax would spread the income base across all land owners rather than only focussing on the sale of homes.”

But the Baird Government is giving the proposal an especially wide berth, with Treasurer Gladys Berejiklian pointing to the need for the state and federal tax mix to be addressed first.

“Reform must occur holistically and in the context of any broader reform of federal-state relations,” Ms Berejiklian told AAP.

One clear reason for the heightened political caution is that any spreading of the property tax base necessarily hits many more property owners than it now does – and every year – in order for the average amount paid to go down.

Extending the land tax to existing owner occupiers, although far more fiscally efficient, nonetheless remains another political headache the Baird Government doesn’t want to own.

A real electoral problem for state governments is that even though annualised land taxes can progressively and predictably tap the value of properties at regular intervals, the rate-like mechanisms also hit asset-rich but cash-poor owners hard – especially retirees in established residential areas that have appreciated in value over time.

While stamp or transfer duties hit all buyers – especially new market entrants – by virtue of increasing effective prices, they also largely spare owners content to stay put, a setting that a growing number of groups now says is harming the wider economy through the imbalances it creates.

“By distorting buyer behaviour in the property market and limiting the ability for skilled workers to re-locate to meet employer demand and live closer to where they work, the exorbitant cost of stamp duty in NSW puts employees and businesses at a competitive disadvantage and harms the long term growth prospects of the state economy,” said NSW Business Chamber Chief Executive, Stephen Cartwright.

“A homebuyer would have to pay more than $41,000 in stamp duty costs when purchasing a house priced at the Sydney median which is now more than $1 million. This acts as a massive disincentive for people to buy and sell property, which affects labour mobility and weighs on economic activity.”

Property developers are equally keen to see the ‘buyer’s tax’ pushed off their books and spread around.

“This is an excellent tax reform and will provide huge benefits for home buyers and a steady income stream for the government to fund infrastructure,” Urban Taskforce’s Chris Johnson said of the KPMG report.

“Increasingly, young people are finding it more and costly to purchase a home, and stamp duty adds thousands and thousands to the cost of their mortgage. A land tax ensures that a larger pool of people contribute a small amount of tax, rather than hitting a home buyers with huge financial burden. Who wants to see their children struggling to pay off all thousands of dollars of taxes when they buy their first home?”