The Australian Council of Social Service wants to see stamp duties scrapped and replaced by a land tax.
A key welfare group is urging the Turnbull government and states to switch from stamp duties to a land tax as part of a national tax reform package.
Australian Council of Social Service boss Cassandra Goldie says such a switch would stabilise the tax base for the states and improve housing affordability.
Scrapping stamp duties would remove barriers to entering the housing market and encourage greater investment in new housing stock.
Dr Goldie said if the goal of tax reform is economic growth, then this is the best reform option and should be implemented before consideration of further tax cuts to individuals or companies.
She says stamp duties provide an unstable, inconsistent and largely unpredictable source of revenue as they are tied to volatile housing markets.
As stamp duties are paid up front, it inhibits the ability of new home buyers to enter the market while discouraging older people from downsizing in retirement.
"We understand that this will be a politically difficult reform, but it is a fundamental one that will require leadership," Dr Goldie said in a statement on Monday.
It will include the Commonwealth having to stump up some money to help with transition arrangements and compensation for low-income earners, farmers and retirees.
"If the prime minister is serious about a growth-friendly budget he needs to allocate some funds to support the states and territories to steer the path towards a broad-based land tax in the interests of economic growth," she said.