The leader of the Australian Capital Territory has suggested the federal government should consider paying states and territories to engage in tax reform that could include scrapping stamp duty.

Under the leadership of Andrew Barr as Chief Minister and Treasurer, the ACT Labor Party has committed to phasing out stamp duty in the territory over the next two decades in favour of a property tax.

Speaking at the Housing Industry Association’s Building Better Cities Summit in Sydney yesterday, Barr urged his federal counterparts to incentivise the idea of tax reform for states and territories.

“I encourage the Commonwealth to consider incentive payments to the states to stimulate reform," he said,” Barr said.

"[Asset recycling] has been a very worthwhile exercise – encouraging states to put assets to most productive uses,” he said. 

“A similar idea for reforming taxes would be worthwhile. Political courage will be rewarded and generations of home buyers to come will thank us."

According to Barr, home-buyers, investors and the government will be better off in the ACT once stamp duty is abolished completely.

"Lower conveyance duty is a positive for housing affordability and is beneficial for first-homes buyers, downsizers and interstate migrants to the ACT," he said.