THOUSANDS more home buyers will pay the state government's new property transfer tax each year after the Treasurer, Eric Roozendaal, decided it would not be indexed to counter the effect of rising Sydney property prices.

It can also been revealed that the $429 million the tax is forecast to raise over the the next four years will be funnelled directly into consolidated revenue, despite the Lands Minister, Tony Kelly, saying it was introduced to fund increased security measures for land transfer documents.

The tax, called the Torrens assurance levy, imposes a rate of 0.2 per cent on the portion of residential and commercial property sales between $500,000 and $1 million and 0.25 per cent on the portion above $1 million.

It is due to begin on July 1 and has been criticised by the property industry as ''just another stamp duty increase''.

A property sold for $600,000 will attract a charge of $200, while the tax on a property sold for $1.6 million will be $2500.

When Mr Kelly announced the tax before the budget, he forecast it would raise about $90 million each year and said no decision had yet been made about indexation. However, figures published in the budget papers reveal that the government expects to collect $96 million next financial year, $105 million in 2011-12, $110 million in 2012-13 and $118 million in 2013-14.

A spokesman for Mr Roozendaal told the Herald that there are ''no plans'' to index the thresholds at which the tax rates cut in.

This means that as property prices rise, more property sales will be subject to the tax and those already caught will pay more tax, significantly increasing the government's revenue take. The median house price in Sydney is $600,000 and is forecast to rise as high as $1 million within a decade. Legislation outlining the tax also reveals proceeds will flow to consolidated revenue, instead of to the Torrens Assurance Fund which insures property holders against document fraud on their property for the time they own it. At present, a charge of $190 covers the administration of the fund. Mr Kelly has said the new tax was needed to adequately fund its potential liabilities, which are about $20 million at present.

Under the changes, the Lands Minister gains the power to determine, in consultation with the Treasurer, how much money is paid from consolidated revenue into the Torrens Assurance Fund and when it is paid. The legislation, which is before Parliament, also grants the minister the power to change the rate of the tax by introducing a regulation published in the Government Gazette, removing the need for any parliamentary debate.

Mr Roozendaal's spokesman said the revenue forecasts in the budget papers were based on figures provided to Treasury by the Department of Lands, which would indicate how many extra property sales are expected to attract the new tax. But a spokesman for Mr Kelly declined to provide the figures to the Herald.

''Actual [tax] receipts will depend on the level and composition of property market activity,'' he said. ''The government will incorporate developments in the property market into the updated estimates it provides in its half-yearly review in December.''

The chief executive of the developer group Urban Taskforce Australia, Aaron Gadiel, said it was ''clear that this new levy is a new tax and has little to do with recovering the costs of the land titles office''.

The Opposition Leader, Barry O'Farrell, has promised to repeal the tax if the Coalition is elected to government in March.