Australia Day celebrations in Sydney's inner west are set to be scrapped in favour of the Aboriginal festival Yabun under a council proposal aimed at a "more respectful" approach to the national holiday.

The Inner West Council will next week vote on a motion to move celebration events from January 26, following an edict from Home Affairs Minister Peter Dutton that councils that refuse to hold citizenship ceremonies on Australia Day will be stripped of the right to hold them altogether. Citizenship ceremonies will continue.

Crowds party at One Day Sundays at the Vic Hotel in Enmore on Australia Day, 2014. Credit:Cole Bennetts

Council sought feedback after the 2019 event and 37 people – "19 per cent" of whom identified as Aboriginal – responded to an online survey, with most opposed to holding a celebratory Australia Day event.

Labor Mayor Darcy Byrne said moving the Australia Day celebrations at Enmore Park to a different date would stop it from competing with Yabun and recognise that for Aboriginal people it is a day of sadness rather than celebration.