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There is a lot being discussed in the media on a whole range of issues facing our country, from housing and super, to regulatory concerns and taxation. While some of this attention is warranted, I think perspective has been lost on others.

Unfortunately, the GST system in Australia hasn’t worked, but I don’t know any country in the world where a 10 per cent goods and services tax has been successful. Especially in Australia, where the tax really isn’t 10 per cent because it doesn’t include health, education or food.

My view is that the GST ought to be increased significantly, to about 15 per cent, but only if indirect taxes such as stamp duty, fringe benefits and payroll tax are abolished to assist businesses, and measures are introduced to protect low income earners and others who would be disadvantaged by a higher GST.

Take payroll tax. There wouldn’t be a politician in this country who doesn’t agree that it is an immoral tax and a disincentive for businesses to employ, yet it can’t be removed because what’s going to plug the revenue hole? This clearly demonstrates to me just how broken our tax system is.

Neither workers nor business owners are encouraged or given incentives to invest or to grow their businesses. In many instances, low income earners are actually worse off by working overtime and then paying a much higher tax on the extra hours worked.

Look at housing. The problem with the high cost of housing in cities like Sydney and Melbourne is that 30 to 50 per cent of the cost of new housing is made up of taxes. The bureaucracy and red tape needed to get approvals for new housing have exacerbated the problem.

People also forget that Sydney and Melbourne’s sky-high property price tags are driven by supply and demand. Sydney and Melbourne are the only two cities with significant population growth and an acute shortage of new housing.

From 2002 to 2012, Sydney was the worst performing capital city in Australia for growth. Values went up by less than 3 per cent, and that was before inflation. It has only been in the last few years that Sydney has been playing catch up. I think the hotter areas in Sydney will probably settle down to a 7 to 8 per cent increase this year, and I am confident these really big spikes in values will also ease.

All levels of government have lacked a strategy to ensure the orderly supply of housing to keep up with demand. Something needs to be done because it is precluding people from getting into home ownership, especially first home buyers.

I believe negative gearing is here to stay, and it has been a good thing for Australia by encouraging new housing development and providing an incentive for investors who in turn provide rental accommodation. I think the government should introduce a ceiling limit as negative gearing wasn’t designed to enable someone to buy a $20 million apartment, rent it for a 2 per cent yield and claim the shortfall on negative gearing benefits.

I have the same view with superannuation: individuals having $10 to $15 million in their super fund were not what was intended when super was introduced. The government needs to take a careful look at these things and make it more equitable at the extreme high end.

I also agree with regulators’ concern with the high proportion of owner occupiers taking out an interest-only home loan. Australia is enjoying the lowest interest rates in our history and it concerns me that people are not taking advantage and reducing debt. Interest rates will eventually creep up again and the higher the interest rate the more difficult it is to reduce debt, so owner occupiers need to take the opportunity of repaying principal, especially when interest rates are so low.

John Symond is the founder and executive chairman for Aussie Home Loans.


Posted by John Symond – Domain (Fairfax) on 21st March, 2015