Small Business Heroes: Navigating Tax, Structure, and Australia's Dream Problem

In our conversation with Jacob Fahmy, Client Director for Latitude Accountants, the boys discuss all things small business - the backbone of the Australian economy. 

Australia's small business owners are facing unprecedented challenges through increasing regulations, proposed tax changes, and economic policies that favour large corporations over local entrepreneurs.

Jacob explains how structuring is the cornerstone of tax and accounting for small businesses (as well as employees) by helping you save significant money and headaches by getting things right at the start. 

Elsewhere we discuss productivity, working from home, and death taxes.

Book a free discovery meeting with Latitude Accountants if you're an ABN holder to ensure your business is structured correctly for your goals.

Contact Jacob Fahmy: 
Instagram: https://www.instagram.com/jacobfahmy 
TikTok: https://www.tiktok.com/@jacob.fahmy.tax
Website: https://latitudeaccountants.com.au

Follow us for more property news and mortgage advice!

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DISCLAIMER This podcast contains general financial information only. That means the information does not take into account your objectives, financial situation, or needs. Because of that, you should consider if the information is appropriate to you and your needs before acting on it.

Episode Transcript

Speaker 1 (00:00):
The concept of taxing unrealized gains is ridiculous,
so we are forcing people tomake financial decisions simply
to pay their tax.

Speaker 2 (00:08):
What have you seen over the last three to four
years, especially across thesmall?

Speaker 1 (00:11):
businesses.
All we've seen is legislationafter legislation and absolute
battering ram plowed through thesmall business owner.
If you increase a tax orintroduce a tax on death, you're
disincentivizing someone's coremotivation to do or build
anything that is productive andthat creates a lasting impact.
There's an excellent video onYouTube by Matt Barry and it's

(00:34):
called Put Another Aussie on theBarbie and it talks about this
thing that we have in Australia,where we are a lucky country
because we are so endowed innatural resources, so much so
that one of our biggest exportsis natural resources.
It is our biggest export.
We sell them our coal, our gasand all of our resources, and
the irony that the Australianpeople pay more for their energy

(00:56):
than the people that we sell itto is preposterous.

Speaker 3 (01:01):
Welcome to the Finance Show with Joe.
He's Joe, I'm Michael, andtoday we have a very special
guest, jacob Fahmy.
Hi, how are you, hey, good.

Speaker 2 (01:08):
Thanks for having me on.
You know I've been trying todrag you on here for about three
months now, so I'm extremelyexcited to get you on here
because there's a lot of thingsthat are actually going on in
the economy right now.
So before we kick off, I justwant to give everyone a brief
introduction into who Jacob isand where Jacob has come from.
So Jacob started off as a cadetat Nexia.

Speaker 1 (01:29):
Am I correct in saying that, mate, you've done
your LinkedIn research?

Speaker 2 (01:33):
You know I'm on there stalking all the time, so you
were there operating as a cadetfor 10 years.
Am I correct in saying that?

Speaker 1 (01:41):
No, if I was a cadet for 10 years I'd be doing that
he hasn't promoted me beyondcadet, no, no.
So I was a cadet at Nextyap fora while, and I'll take you back
to the reason.
I actually even got into theindustry.
I'm in year three and I wantedto become a doctor.
I wanted to become a doctorbecause in Egypt I'm Egyptian
Well, in Australia, but I'mEgyptian the only things you can

(02:01):
do is become a doctor, engineer, pharmacist or accountant.
Right, I've got a couple pilotsas well but it's crazy.

Speaker 2 (02:07):
They're crazy specialists it's those like five
things and then nothing else.
Like that's it.
You're on the dole, that's it,that's it.

Speaker 1 (02:13):
So, um, I knew I wanted to be an accountant from
a young age.
I want to be a doctor, but thenI did this maths test and I did
really well in a maths test.
I've got a distinction.
You pay five dollars.
You, university new south walesdo this test for you.
I've got a distinction you pay$5, university of New South
Wales do this test for you.
I've got a distinction and I'vesaid that's it.
If I'm in numbers, I'll dosomething numbers related.
I then do business studies inyear nine, say, donald Trump

(02:33):
doing the apprentice.
We had a rowdy class so theyjust played reruns of the
apprentice.
We weren't allowed to do actualbusiness studies work.

Speaker 3 (02:39):
No, no, no.

Speaker 1 (02:39):
Public school.
And anyway, I said, if someonein business and someone in
numbers had a baby, what wouldthat be?
And it was an accountant.
So I started my cadetship inNext Year.
I spent three or four years atNext Year building up my skills
and then realized I was justdealing with a lot of old money
being moved around in variousstructures.

(02:59):
It wasn't my thing.
I really wanted to get intobusiness to help the small
business owner.
So I worked my way fromNextYard to Latitude Accountants
, which I joined in 2016.
At Latitude Accountants, Ifinally saw what it was like to
help up-and-coming smallbusiness owners with a couple of
guys who had started the firmout of nothing and really were a

(03:20):
part of my community that I hadlooked up to for a long period
of time.
John, tufik, the founders yes,were a part of my community that
I had looked up to for a longperiod of time, john and Tufik
the founders.
So I worked there from 2016 allthe way up until about 2019,
2020, and I thought I was soinspired by the boys and their
efforts I thought I couldprobably do this myself.
I might go have a crack.
So I got my own tax agentnumber, told Tufik, I was doing
it and went out and started myown firm Advisory Corporate

(03:42):
Accountants.
I did that for three years,scaled very quickly, put on a
lot of, built the ledger and allof a sudden realized like most
business owners I think gothrough this journey where I was
very much a technician but Ihad to figure out how to
actually run a business.
So I figured it out on the flybut then realized I need systems
, people and resources to helptake this to the next level and

(04:03):
support my clients in a moreeffective manner.
That doesn't sound relatable.
So there's a book called theE-Myth.
It's a great one that takes youfrom technician to operator.
And I joined back in withLatitude Accountants who were
still mentoring me throughoutthat part of my career John and
Tufik.
We got together and we saidwhat are we trying to do here?
And we set a vision and amission.

(04:24):
We quickly go through thevision and mission and so we
believe that the small businessowner is the hero of the
community.
Our vision is to help 1500heroes make their dreams a
reality.
Why are they the hero?
Because they're the ones whosacrifice their jobs to create
jobs for others.
We do that in three ways, helpyou understand your numbers,
manage your tax and navigate thesmall business journey.

(04:44):
We encapsulated that, put allover our walls in our own unique
way, and we were the fastestgrowing accounting firm in
australia last year.
So that's the long-winded storyof my career but I there's.

Speaker 2 (04:55):
there's so much to unpack there, especially with
the story behind latitudeaccountants how you want to help
you know 1500 small businessesor individuals that own small
businesses, grow and prosper.
A lot of people think thataccounting is all about your
rear view mirror, when inreality you actually need them
to be your high beams at certainpoints, because if you want to

(05:17):
spend the next financial yeargrowing, you need to make sure
that your books line up so thatyou could possibly borrow
business loans, so that you canmake sure you have enough
resources for these individuals.
Or you need to make sure that,let's say, your payroll is in
line, that you're under that$1.2 million threshold, so you
don't have to pay that payrolltax.
That's right.

(05:38):
Was that the right number?
That's pretty close.

Speaker 1 (05:39):
Yeah, very good.

Speaker 2 (05:41):
Not just the broker over here.
But what I'm just trying to sayis a lot of people don't
understand that accountants justaren't about tax.
It's all about structure aswell.
Take me a little bit throughsome structures that you've
assisted people with in the pastto really help them thrive in
the future.

Speaker 1 (06:00):
Absolutely.
That's a great point, joe.
And yeah, we're hiringaccountants.

Speaker 2 (06:04):
No, no, joe, and yeah , we're hiring accountants.

Speaker 1 (06:13):
No, no, no, I've got enough studies done.
Very good, look, we always saystructure is like the
cornerstone of everything taxand accounting related.
If your structure is right, itwill grow and it will help you
manage your taxes effectivelyand move money around your
family group and grow wealth inan effective manner.
So a classic example.
I'll give you two.
But let's say you're a smallbusiness owner, you're sole
trading and you want to takethings to the next level.

(06:34):
Well, as a sole trader, there'stwo issues with that.
You have.
Number one unlimited liability.
You're exposed from day one.
And number two as soon as youstart earning really good money,
you're on top marginal rate,and so there's no real way to
either manage your taxeseffectively or protect yourself
from some of the liabilityyou're exposed to.
So, right from the get-go, ifwe have a business owner who's

(06:55):
in an industry that's a bitriskier and who is starting to
make a bit of money, it would beprudent to have a think about.
Okay, maybe you need to go intoa company structure, because
having a company gives you thecorporate veil, protects you
from the risk of the businessand also gives you a 25% tax
rate if you meet certainconditions.
But then okay, we set up thecompany, but who's going to be
the shareholder of the company?
And that's really importantbecause a lot of people get this

(07:17):
wrong and to undo this laterdown the road costs you a lot of
money Capital gains tax to movethe shares around.
So from day one and I alwayssay this if I were a small
business owner and I wanted togrow my business beyond myself
and have systems, people andprocesses, I would set up a
company and I would have theshares of that company owned by

(07:38):
a family trust, and that givesme the best of both worlds.
A company is a nice commercialstructure to protect me and to
help me manage my business, buton the back end I have a family
trust and, where I meet certainconditions, I can pay dividends
out to that family trust anddisperse it throughout my family
group.
Obviously, I've simplified it alot and there's a lot of things
you need to go through withyour account to make sure that's
possible for you.

(07:58):
But that is, for example, areally good structure for a
small business owner.
Now that's again, it's horsesfor courses and it's so unique
to each business owner and theirgoals.
So don't just rush into thatstructure or the structure Bob
at the bar told you to do, butthat's the prime example for a
business owner.
If you want a property investor, you really need to think about
what is your long-term goal,which I'm sure, joe, you work

(08:19):
with your clients on and fordifferent structures there is
different lending, which I'msure you're very well across.
And not only that with eachstructure comes different tax
advantages and disadvantages.
For example, you want anegatively geared rental
property, potentially yourpersonal name, but it depends.
What do you do for a living?
Are you taking on risk in yourpersonal name?

(08:41):
Are you a director?
Is the property positivelygeared?
Then we might put that in afamily trust.
However, family trust might beexposed to land tax in certain
states.
So there's so much that goesinto structuring.
There is no one structure foreach individual.
It's really unique to everybusiness owner and it's really
important that we say, beforeyou transact, get in touch with

(09:03):
your accountant, get in touchwith your broker and get in
touch with your trusted advisors, so that they're all on the
same page and that you have astructure that supports you and
achieving your goals, which areunique for every person.

Speaker 2 (09:15):
I love everything that you've said there and I
want to highlight something inregards to making sure that your
structure is in place andmaking sure that you have the
discussion with your advisors.
The reason why I'm bringingthis up is because I've gone
through a lot of changesrecently.
okay, so I got married at theback end of 22 and then I've
recently had my first childcongratulations, thank you,

(09:36):
thank you um, as you've all seenon social media um, but my
thought process behind the way Iwould acquire property, or the
properties I would look at, arevery different to what they were
three years ago, even a yearago.
And this is why it's importantto speak to an accountant
regularly.

(09:57):
And I don't mean regularly likecall them up every week, I mean
quarterly.
Speak to your accountantquarterly and have an accountant
that contacts you quarterly,because if you have those items,
your values, your riskassessment, everything changes
in a heartbeat.

Speaker 3 (10:12):
for example and, michael, I know you want to say
something, just give me onesecond no, yeah, oh no, I was
just going to ask is this morefor, like, business owners, or
this advice for everyone, bothokay.

Speaker 2 (10:22):
so think about my personal situation.
Okay, just taking on 64 squaremeters here, 12 square meters
here, 76 square meter office inbraggaroo not cheap, okay,
that's one risk I've taken on.
Another risk that has occurredrecently is my wife is is no
longer working the hours thatshe was working before, so our
income level has dropped on herside.

(10:44):
Thankfully, I'm able to assistin my ways.
I've got my staff.
Everyone has stepped up.
We've got the resources to doso.
But when it comes to spendingthe properties that we were
looking at previously, I wasthinking to myself you know what
we can take that hit.
Now I'm thinking to myself no,maybe not, because negative
gearing doesn't really have itseffect until the end of

(11:07):
financial year.
You've still got to manage thecash flow.
So let's say, my interestrepayments are $10,000 a month.
Okay, just for example, I'mspending $120,000 a year on
interest repayments.
Okay, people are like, oh, butthat's negative gearing, you can
get that back when it comes totax time.

Speaker 1 (11:29):
No, it doesn't come back to me, it just reduces my
tax liability.

Speaker 2 (11:30):
You're loving everything I'm saying right now.
All it's doing is reducing.
I still have to have the cashflow to pay that.
All it means at the end of theyear my personal tax bill is
going to be less.
That's all negative gearingmeans.
So for me to say, oh, you knowwhat $10,000 in interest
repayments every single year Ican afford that.
No, it's got to be different.
Now I've got a baby at homethat needs to go see the doctor

(11:50):
right now I've got a baby athome that needs formula, bottles
, clothes.
He's going to outgrow very, veryquickly because the kid's a
unit.
For those not from WesternSydney, that means he's large.
But what I'm trying to say isokay, you know what, Instead of
us looking for a mortgage or aproperty that's $10,000 a month
in interest payments, we've gotto go find something that's

(12:10):
$5,000 but might have moregrowth down the road and
possibly closer to that positiveyear ratio.
It might not be able to growexponentially like a $10,000 a
month one, but it fits ourprofile.
And this is going back to Jacoband why you need a good
accountant, so that's reallygood advice.

Speaker 1 (12:29):
The worst advice accountants give, in my opinion,
is hey, you're making a lot ofmoney, you should go and buy a
negatively geared rentalproperty to reduce your taxable
income.
And it's so consumed by theeveryday person that it's almost
like oh yeah, I want to buy anegatively geared rental
property.
But, to your point, no oneunderstands that if you're
negatively geared, you arelosing money every month and
that actually has a cash flowimpact.

(12:51):
You are actually losing thatmoney every single month and,
yes, you get a tax advantage,but I would never tell you to
spend $1 just to save $0.30 to$0.47.
So you really need to reassesswhether buying a negatively and
here's the other thing that irksme with that advice is that's
not tax advice.
That's actually financial.

(13:11):
It's not.
I don't know if it is or notfinancial advice, but we're
teetering the edge there,because for someone to buy a
negatively geared rentalproperty, you need to understand
what are your goals in terms ofwealth?
What are your goals in terms ofhow much you make?
Where your money is going?
Super overall investmentstrategy.
Blah, blah, blah, blah, blah.
And it's part of the overallpicture.
It's a financial strategy withtax consequences.

(13:33):
It is not a tax strategy, apure tax strategy.
In fact, very little are taxstrategies.
They are always commercialdecisions you make with a tax
consequence.
That comes with it goodconsequences and bad
consequences, and so the rightadvice like you so eloquently
put it is really assessing whereyou want to be and what works

(13:55):
for your family in that scenario, and then thinking about the
tax consequence on how you canmitigate or position yourself
differently.

Speaker 3 (14:03):
That's fascinating, because I have only heard the
opposite of that Like everythingthat you like what you were
saying, like that standardadvice, that like, yeah, just
get it and make it negativelygeared and you'll be fine.
Yeah.
But it's just not the case.
I'm just I'm glad to hear it.

Speaker 2 (14:16):
No, it's something that a lot of people don't
really listen to and they justthis is the fucking thing that
shits me about this industry.
And yes, I did curse because Iam so agitated by it.
And I actually said it to Jacobwhen we first met on Zoom and
he's like, well, this guy'sintense.
Okay, I said to him, brokerscan now get their certificate

(14:41):
for a diploma on a one-daycourse, chachi PT assignments.
Okay, all right, you go to athird party distributor of these
certificates, you go online,you do their quick course Three,
four hours.
You are now able to handle taxfile, numbers, passports,
everything.
Those individuals out there arelike oh, you could service the
debt.
Oh look, yeah, you justnegative gear the property.
Don't get your tax advice froma broker.

(15:02):
Oh my God, what are you guysdoing?
Doing?
There's accountants for areason, and accountants have to
do three to four years ofuniversity just to be able to
provide this advice, and then,on top of that, to become a
chartered accountant is anotheryear afterwards two, three years
two, three years.

Speaker 1 (15:18):
And then uh, cfpa there's one level above
chartered account there's afellow fellow which currently
John in our firm is, and that'syou've got to spend actually 15
years as a chartered accountant,so it's quite a thing.

Speaker 2 (15:32):
Yeah, it's ridiculous that these things are occurring
, and I'm just going tohighlight something right now
Don't get your tax advice from amortgage broker.
They are there to help youborrow money.
Always get your tax advice froma mortgage broker.
They are there to help youborrow money.
Always get your tax advice froman accountant.
Now we're going to take a quickbreak and I want to touch on

(15:52):
something that's very importantto both of us, and that is
productivity.
The reason I wanted to bringJacob on today.
He is helping small businesses.
He wants to help 1,500 smallbusinesses thrive and over the
last three years, or even more,I want to say the last four or
five years we've actually seen asmall business collapse in

(16:16):
Australia.
We've seen multinationalcorporations make record profits
, but we've also seen over Iwant to say 2,800 builders and
developers go bankrupt.
We've seen restaurants closeddown.
We've seen empty office spaceall over Victoria.
Yeah, and currently in thefederal government they're

(16:37):
discussing how can we increaseproductivity and you could see
the visceral reaction I haveright now and they're having an
economic roundtable discussinginheritance and death tax.
The second one is the cost ofelectricity and power bills, and
you can see how happy I am todiscuss that one.
The third one is this newincrease in superannuation tax

(16:59):
as well as unrealized gains, andthe fourth one, if I am correct
in saying this, is the deathtax.

Speaker 1 (17:07):
It was the third, but the fourth one would be the
work from home legislation thatthey're talking about in
Victoria.

Speaker 2 (17:15):
Okay, so, the reason why I took a deep breath there
is because they want to increaseproductivity.
Let's revert back.
I'm just going to take everyoneback a little bit.
So they want to increaseproductivity all across
Australia and the VictorianLabor government actually lost a
lot of votes over the last Iwant to say year or so because

(17:37):
they introduced all these newtaxes.
I want to say year or sobecause they introduced all
these new taxes.
And then to increaseproductivity, they've now also
put in legislation, or they'veproposed a legislation, where it
would be required that you workfrom home two days a week.
Okay, so we want to increaseproductivity, but people get to

(17:57):
work from home two days a weekand I'm not opposed to working
from home.
We want to increaseproductivity, but people get to
work from home two days a weekand I'm not opposed to working
from home.
I am opposed to.
We've got this requirement inplace.
You have the right to switchoff, but also you're working
from home two days a week.
How am I supposed to, as me asmall business owner, how am I
supposed to visually see ifsomeone has actually completed
their requirements and if theyhave not completed their

(18:19):
requirements?
I'm not allowed to contact themafter 5pm to say hey, did you
complete what you had to today,so let's get into everything.
Jacob, sorry, I'm going on myrambles.

Speaker 3 (18:29):
Okay, we'll save that for my own personal Instagram
stories and reels and let's getinto this.

Speaker 2 (18:33):
So what have you seen over the last three to four
years, especially when it comesto small businesses?

Speaker 1 (18:39):
Absolutely.
I've said this a million timeson a million different podcasts,
but I want to keep reiteratingthis.
In Australia we have a dreamproblem.
I always say the American dreamis to start a business, the
Australian dream is to buy ahome, and I say the Lebanese
dream is to build jupies, as youonce said.
The Egyptian dream is to go touni, get educated and become an

(19:01):
engineer, doctor, lawyer, insertany other profession.
Now, the problem with this isthat it's created a culture that
doesn't lift the small businessowner up into hero status.
And there's a reason we'rereally specific on heroing the
small business owner, becausewhen you become a small business
owner, you provide jobs toother people and increase
productivity.
Small business owners are theones that innovate.

(19:23):
Small business owners are theones that create careers and
small business owners are theones that create community feel
and fabric.
So think about the local cafeyou go to that's vibrant and
buzzing, the local club you goto on a Friday night.
All those sorts of things drivethe community and drive the
economy.
All those sorts of things drivethe community and drive the
economy.

(19:45):
But unfortunately, over the lastfour to five years, all we've
seen is legislation afterlegislation and absolute
battering ram plowed through thesmall business owner, whether
we're talking about things likeworking from home two days a
week.
Now, like you, there is noissues with working from home.
That's not actually the issue.
The biggest issue is when agovernment gets involved in the

(20:05):
relationship between an employerand employee.
It takes two to tango.
If you're working for someoneyou don't like, you should
reconsider why you're thereworking for them.
Vice versa, if you're anemployer and you can't trust
your employee working from home,maybe that's not the right
employee for your business.
But I'll tell you what's notright.
What's not right is that wehave an external party get in

(20:30):
the way of two people that haveshook hands and said okay, I
want to take this job, you'regoing to pay me X, y, z.
These are the conditions we'regoing to set yes, I agree, or no
, I don't agree.
There's two parties at thatdeal.
So when we force the smallbusiness owner to say, no, your
staff have to work from home orhave the right to work from home

(20:51):
two days a week, we'vedestroyed that relationship
between them.
We've created an unfair playingfield for small business owners
, because every resource islimited for a small business
owner, but if you're a bigcorporate, you have not
basically unlimited resources,but you have a lot more
resources to be able to handlechanges.
Do you know who licked theirlips at the proposals of the

(21:12):
two-day work from home?
It's big corporations.
It's an unfair playing fieldfor small business owners who
are trying to manage staff, whoare trying to grow, who are
trying to innovate, and we'reabsolutely destroying them and
allowing the big corporationsEvery time we increase the
minimum wage.
Do you know who licks their lips?
It's the bigger corporates withthicker profit margins who can
increase their prices.
If Nike increases their prices,nike's still going to make

(21:34):
money.
If the small business owner hastheir minimum wage of their
staff increased, they have topush that on because they can't
afford to reach into their backpocket.
Most small business ownersdon't make a crazy amount of
margin as it is now.
They have to force the consumerto pay more and that creates
friction.
So it all sounds good and noblefor all these things that we're
putting in place, but is it theright move for a small business

(21:55):
owner?

Speaker 3 (21:56):
it could be argued completely opposite would it be
a better recommendation like it,because it, because it's
obviously going to be talkedabout in parliament and such
Would it be better to put acompany size limit on this work
from home stuff?
So if you're I don't know like50 below this legislation does
not apply to you and above itdoes, would that be a better
solution?
Or would it just be better toscrap it entirely?

Speaker 1 (22:23):
I would.
Honestly, I'm opposed to most.
I uh very um, I don't want tosay conservative, uh, there's a
more libertarian on this one.
Yeah, I believe the employerand the employee should come to
their own agreement.
I, because what's right for youis not right for the next
person, and I don't believe inmass legislation to just decide.
Australia is so good at doingthis, by the way, australia is
so good at saying this.
Little one thing happened.

(22:43):
Therefore, the way we doeverything is going to change.
Oh boy, we're like we throw thebaby out with the bathwater.

Speaker 3 (22:51):
Jesus yeah yeah yeah, too close to home right now.
Yeah, yeah, yeah.

Speaker 1 (22:56):
This one small thing happened and it may be serious.
I'm not saying it's not.
I'm not mitigating ordownplaying the seriousness of
one bad employer-employerrelationship.
I'm not.
But what I'm saying is thatmost people can come to an
agreement between their employerand employee and they don't
need the government stepping inand acting for that.
You may feel differently,michael.

Speaker 2 (23:17):
I actually like that suggestion.
I actually think that imposingit on all businesses is a bad
move.
So I actually really like thatidea and I also really like what
you said.
I like the fact that weshouldn't have the government
getting involved in saying, hey,you have to work from home two
days a week and go to the officethree days a week.

(23:39):
I want to give you an example.
What about the companies thatwent and built these sky-rise
towers and then the smallbusinesses that took a punt,
went and bought a commercialsuite and now all of a sudden
it's empty.
And guess what?
The person that's walking pastthat saying oh no, that's an
empty shop, I don't want to goin there, I don't want to visit,
because I don't think there'smany people that are there that
are going to be able to helpthem.
It's not fair.

(24:00):
Who it is fair to isPricewaterhouseCoopers, and I
keep bringing them up and Ipromise to God I love them, but
I shouldn't be bringing them up.
Pricewaterhousecoopersdownstairs they might have 100
staff, 30 desks, but becausethey have the resources, they
can accommodate this.

Speaker 3 (24:18):
I'm in agreement that the government shouldn't be in,
involved in the personalrelationships essentially what
yeah that you're creating, orprofessional relationships and
stuff like that.
Like mandating, uh, work fromhome days should not be the case
.
But is it like better to belike, yes, you have the right to
bring up with an employer, butthat already exists, that

(24:38):
already.
That's what I'm thinking, right, an employer, but that already
exists, that already exists.

Speaker 2 (24:40):
That's what I'm thinking.
Right, that's what happened.
That already exists withincontractual law where, every
single year, your employmentcontract, I'm pretty sure you
have the right to be able torenegotiate with your employer
and then discuss those things.
But if I have someone in aninterview with me and this isn't
me discriminating, this is mejust knowing the productivity
level I need from theindividuals in my team.

(25:01):
If they say to me, oh, can Iwork from home four days a week,
all I'm thinking to myself ishow are you going to learn?
Learning is done via osmosis alot of the time, and what
osmosis is is when you aresitting in a group of
individuals and hearing how theytalk.
You know a lot of the slogansor a lot of the ways that I was
taught mortgages was bylistening to the people four

(25:22):
rows away from me, having themsay oh, we base our interest
rates on LVR tiers.
I thought you know what?
That's a great way to be ableto explain it to people, so I'm
going to start using that.
I wouldn't have learned that ifI was told, hey, just work from
home four days a week andyou're going to write mortgages,
and guess what I wouldn't haveperformed.
And, on top of that, would havebeen fired.

(25:42):
So you need to be able tocreate those environments, that
cultures for individuals.
I agree with what you've said,and I've agreed with what you've
said, and I also think it'sabsolutely stupid that they're
trying to make this legislatureyeah it just seems like they're
fiddling with something thatdoesn't need to be fiddled with.

Speaker 3 (25:56):
Yeah, 100%, as I see it.
Okay.

Speaker 2 (25:59):
The next thing that I want to discuss is the new
inheritance and debt tax.
Yeah, absolutely, what's youropinion?
I don't have a strong one yet.
Okay, yeah, it's going to come,don't worry.

Speaker 1 (26:09):
Yeah, yeah yeah, so, yeah, there's been talks around
all these productivityroundtables and economic
roundtables, much you know, newstuff that's being should we do
this, should we do that?
Everyone's trying to figure outtheir way and trying to come up
with a solution.
Now, part of that is obviouslyour government has a one.
I think it's a $1 trilliondeficit on the budget at the

(26:30):
moment, or at least leading upto.
So we're trying to find a wayto, you know, pay that off and
manage that as well.
And one of the proposals or oneof the ideas that have been
floating around is a death tax.
Now, to give you a little bit ofcontext, australia, I believe,
did have a death tax once upon atime.
That changed, I believe, in the70s.
I could be wrong, but it didchange in the 70s and they want

(26:52):
to bring one back, and I'll giveyou the pros and cons and then
I'll sort of maybe tell you mythoughts as well.
So the pros of a death tax isthat wealth is distributed upon
death, basically.
So if you have a high net worthindividual, they've built their
wealth using the Australiansystem, using the Australian
economy, using, you know, theproductivity of employees and

(27:14):
whatnot.
So upon their death, thereshould be a 2% tax and we get to
use that money to fund servicesand pay off our debt and create
a better Australia.
That's one side of it, okay.
The other side of it is thathang on a minute, if you tax
someone upon their death, itcreates two issues.
The first is there is generallyan intrinsic motivation to

(27:38):
create wealth and create alegacy for those beyond you.
Okay, and so, and the later yougo in life and as you build a
family, you start to realizethat it's not all about yourself
and you want to maybe do thingsfor others.
Some people are driven likethis, some people aren't.
Okay, that's fine as well.
But if you increase a tax orintroduce a tax on death, I'm

(27:58):
almost left feeling I'm going togo and do all these things and
what the heck is even the pointof leaving a legacy if it's
going to get taxed and washeddown anyway?
So you're disincentivizingsomeone's core motivation to do
anything or build anything thatis productive and that creates a

(28:18):
lasting impact.
Okay, that's number one.
The second argument against adeath tax is that if someone's
accrued their wealth, they havealready paid taxes to accrue
that wealth.
So that money that sits therehas already had income tax paid
on.
It has already had GST gothrough.
It has already had the superfund 15% tax and maybe even

(28:39):
unrealized in the future.
They've already paid all theircouncil rates, their tolls, and
I know these aren't taxes, butthey're all on cost for the
everyday Australian, and sothere's so many.
I could be here if you gave me10 minutes.
I reckon I could fill it withthe amount of taxes we pay
already and to then slap onanother tax right at the end of

(29:02):
their life.
What are we doing here?
So that's sort of the um.
They're both ends of thespectrum.
How do I feel about it?

Speaker 3 (29:10):
I think less tax is better yeah, realistically, it's
always going to be theeconomies often thrive when uh
the government is less involvedand uh, there's a limited tax.

Speaker 2 (29:21):
And I bring this up because you look at, you know uh
states like the emirates.
You look at uh other states.
You even look at singapore.
Singapore's got less tax thanwe do, okay, but they are still
performing quite welleconomically.
And then you look at placeslike norway, who benefit quite a
lot of their resources andwhich we have in aust.
They're going to be started onthat too.

(29:41):
But you look at places likeNorway where you know they're
not as entrepreneurial thinkingas we are here in Australia, but
they also have a really youknow great way of life.
They actually I'm pretty surestudents get paid to go on a gap
.

Speaker 1 (29:57):
If there is yeah, there's heaps of quirks around
that.

Speaker 2 (30:02):
And they also get paid for their university if
they go offshore and completetheir degree overseas, which is
ridiculous.
And then we're here inAustralia and we have all these
other taxes.
The reason I bring this all upis we're reducing the motivation
, or the intrinsic motivation,to go out and build something.
But then you said somethingelse where, well, you used the
Australian system.
You did use the Australiansystem to be able to create this

(30:25):
wealth for yourself.
So me, on both sides of thecoin, I'm sitting there and I'm
going to myself.
Well, hold up.
I do like that thought, becauseif I've used the Australian
system to accumulate my wealth,I want to be able to make sure
it's distributed to my kids, butat the same time, I should have
to pay a little bit extra.
And that 1% to 2% range.
I was thinking okay, the coreissue that I have is I already

(30:48):
know how this tax is going to beavoided.
This is going to be stuffthat's in personal name, the
moment that you go and you setup a family trust or a
discretionary trust and youappoint different beneficiaries
and that upon your death, youwill no longer be the trustee
and instead one of the kidswould become the trustee or
something like that.
The inheritance tax is avoided.
So all I'm thinking to myselfnow is this is going to sell

(31:11):
headlines, but the people thatare extremely wealthy have
already figured out how they'regoing to avoid this.
Instead, what's going to happenis it's the people that have
accumulated a bit of wealth,don't have a good accountant
like the person on my right tobe able to structure certain
things, and their kids are theones that are going to get hit.

Speaker 3 (31:29):
Yeah, that makes sense to me.
I'm also hesitant about talkingabout a death tax and whether
or not it's going to happen,because I do remember when Bill
Shorten was trying to go for theelection.
I think that was 2018, itdoesn't matter, regardless, it
was a while ago yeah yeah, andthey were saying that there was
going to be a death tax, butthat wasn't.
That didn't end up being true.

(31:49):
I just think it's like.
It's a bit like negativegearing.
I think it's political poison.
I don't think.
I don't think anyone will touchit.

Speaker 2 (31:55):
Yeah, regardless of their motivations no, it's, I
just think it's silly.
But even even at its core, justbringing it up gets the average
punter, or the, as we're allcalled now for some reason.
Thanks, instagram, hey that'sthe average australian revved up
and if anything and you know,in our arab culture, I know my

(32:15):
dad, my dad has worked his assoff all of his okay, the moment
that they're going to try andintroduce this, the first thing
that's going to happen is peopleare going to go to their
accountant and say, hey, no.
I don't want this to go.
You know, I worked my ass offand I don't want my kids to be
forced to sell something,because that could happen too Be
forced to sell something sothat we could bring this in.

(32:36):
It's also got a scary name likedeath tax.
I just think they're thinkingof anything to try and repay
their failed ideas or projects.

Speaker 3 (32:49):
Well, it's also taking the burden off, like
people's personal incomes andsmall businesses right, because
that's where most of Australia'stax income comes from.
Right, like it's personal tax,right Income tax.

Speaker 2 (32:59):
Wait, wait, wait.
You think they're it's personaltax.

Speaker 3 (33:00):
Right yeah, income tax.

Speaker 2 (33:01):
Wait, wait, wait.
You think they're going tointroduce a debt tax and reduce
the tax?
No, no, no, I did not say that,okay.

Speaker 3 (33:08):
I'm saying trying to increase overall revenue, then
I'm going to try to reduce thetax.
I don't want that money, butjust to like reduce the burden
on like personal taxes.
So instead of having toincrease personal tax, they get
it from elsewhere.

Speaker 1 (33:19):
Look, I think as well .
There's just two coins andthere's two ideas that are
clashing here, and one of themis that, hey, should we tax our
way to repaying this debt?
Or?
B, should we increaseproductivity so that, with
increased output, we can getmore revenue and just tax it in
the same way?
And so more revenue, same tax,or same revenue, and so more

(33:40):
revenue, same tax, or samerevenue, more tax?
They're the two ideas that areclashing here, and so someone
like myself and I alwaysreference this the american
system was set up.
The literal reason, one of thereasons that country was started
was it was a t-tax and and therevolution against T-tax, and
that's how they declaredindependence, and they have

(34:02):
built one of the most successfuleconomies of all time.
Love them, hate them, thinkwhat you want, just based on the
fact that they have the biggesteconomy that has ever been
built of all time.
How did they do it?
Lower taxes, increasedinnovation, motivation for
someone to go and create and toinnovate and to be rewarded for
their efforts, and not get taxedin every which way, just to,

(34:26):
you know, um, just to crush themso I've got a conspiracy theory
that's just built up in my head.

Speaker 2 (34:32):
No, it's just all of a sudden.
Okay, so do you think thatthey've increased all these
regulations around building andconstruction to actually drive
people away from focusing onusing housing to increase their
wealth and instead startfocusing on different businesses
?
And the reason I bring this upis we've seen you know, senator
bragg uh always posted there's 5000 new regulations in the last

(34:54):
three years um, and we've seena lot of developers actually
exit the industry or, if theyhaven't exited, they've started
to look at regional areas andit's cheaper and it's easier to
build there and stuff.
Do you think that that's apossibility?
They've instead decided todisenfranchise people that were
in property, development andconstruction and instead got
them to focus in on creatingbusinesses.

(35:16):
Do you think there's apossibility?
Nah, I think that's terrible.

Speaker 3 (35:22):
I think you're overestimating their own
competence, and their owninterest in the property market.

Speaker 2 (35:28):
That is true.

Speaker 3 (35:29):
With increased demand and less supply.
As we see, prices go up.

Speaker 2 (35:33):
It's not rocket science, basic economics, you
know, and I don't think it'sthat crazy.

Speaker 3 (35:39):
I'm about to shed a tear.

Speaker 2 (35:46):
I'll give you guys a moment.

Speaker 3 (35:50):
He's going to get so excited when he finds out that
I'm planning to build a duplex.

Speaker 1 (35:53):
Okay, okay, laughs aside.

Speaker 2 (35:59):
The thing that has irked me the most is on today's
economic roundtable.
The first thing that brought upwas electricity and power and
we saw, you know, everyAustralian will pay $250 less
for their electricity bills.
They went up and everything.
But the truth of the matter iselectricity and power bills
let's say and I might even beoverextending here about $2,500

(36:21):
a year.
Let's say for the averageAustralian it's about $2,500 a
year.
Is $2,500 a year really goingto affect people if they drop it
by 20%?
So they're going to have $500extra in their back pocket when
all the prices and everything'sgone up by 41%.
Should they be discussing thisor should they instead be

(36:41):
discussing transparency?

Speaker 1 (36:44):
This is a great point , and you're absolutely right to
question the ridiculousness ofthe fact that we're getting
assistance, and it's suchimmaterial assistance to the.
It's almost a slap in the faceto the everyday Aussies honest
truth.
There's an excellent video onYouTube by Matt Barry and it's
called Put Another Aussie on theBarbie and it talks about this

(37:05):
thing that we have in Australia,where beneath us.
There's a reason we're calledthe lucky country.
We are a lucky country becausewe are so endowed in natural
resources, so much so that oneof our biggest exports is
natural resources.
In fact, it is our biggestexport, and we can trade it not
to someone halfway across theworld, literally to our
neighbours in the APAC region.

(37:26):
We sell them our coal, our gasand all of our resources, and
the irony that the Australianpeople pay more for their energy
than the people that we sell itto is preposterous.
This is the hardest part tounderstand about Australia is
the way our mining and the wayour energy sector has managed to

(37:51):
hurt the Australian, theeveryday Australian, more than
they've been able to help them.
There's a core link between theproductivity of your country
and the price of energy, becauseenergy is literally everything.
It powers everything around youand it moves everything around
you, and there's so much like.
Every time we check inflation,it's one of the core indicators

(38:13):
of inflation how much you payfor energy, right, and the idea
that we oh we got a $200 saving,dude, we shouldn't be even
paying that much for ourelectricity to start off with.
It's not about how much we'resaving.
It's about getting back to thedrawing board and saying how am
I letting myralian people sufferwith high energy prices, but

(38:33):
the our, our competitors in incountries, um, not far from us
are building their economies offthe back of our natural
resources.

Speaker 2 (38:43):
It's ridiculous and they're not paying tax on it
either yeah, and, and and and.

Speaker 1 (38:48):
you've nailed it.
Yeah, yeah, sorry.

Speaker 2 (38:51):
Sorry, I've never seen you lost for words.
I can't believe I did that fora second.

Speaker 3 (38:55):
I have a question.
Is that as a result?
Because I've heard this spokenabout?
I'm not particularly educatedon the subject, but is it
because of our privatized energygrid and things like that?

Speaker 2 (39:06):
No, that's all it is how it came in in 96, 97, 98,
decided to privatize all of it,sell it off, and then that was
it.
Oh, okay.
Well, there you go Okay, butthis is the thing, you can
reintroduce laws, yeah, ofcourse.
You can introduce laws.
You could say hey, guys, youknow what, give us our tax money
.
Hey, you know, want to build anew highway.

(39:26):
I don't want to have toprivatize that and send it to
someone.
And then, all of a sudden, them5 only has two roads, two lanes
on their, on their street, andthere was gridlock traffic.
So we had to build the m8 toget around it.
No, there's a way to do this.
Yeah, it's called having balls.
That's all it is, and we'regoing to cut jacob out of that
clip so he's not included, butthat's all it is it the final

(39:54):
question that I want to ask.
So we've brought up the deathtax, we've brought up the um,
the uh, possibility of sorry,let me.
We did death tax, we've doneelectric vehicles work from home
.

Speaker 3 (40:05):
Work from home.
Okay.

Speaker 2 (40:05):
And the last one, the unrealized gain status, yeah so
, um, I want to move on fromthis topic because we've got one
more to discuss, and it's myfavorite one.
But we've got the death tax,we've discussed working from
home, we've discussedelectricity bills.
The final thing that I want todiscuss is the new unrealized
gains tax and the possibility ofincreasing the amount that you

(40:28):
pay tax in your super from 15%to 30%.
Now, this has been a massivedebate all over you and I had an
argument about this a few weeksago.
It's all about it's a good now.
I had a kid, but this has beenbrought up time and time again.
Have you had clients approachyou and say, hey, I need to
protect myself from this tax?
What's going on?

(40:49):
What are you seeing on yourside and what do you think is
going to actually happen?

Speaker 1 (40:53):
Because they haven't brought the legislation in.
That's right.
That's exactly right.
So it's a good note you make.
This isn't legislation that isin at the moment, but it's very,
very hotly debated at themoment and, with the Labor and
the Greens controlling the rooms, there is a likelihood that
this can definitely come intoplay.
Now two things.
First of all, unrealized gains.
Nothing irks me more than taxon unrealized gains, because of

(41:16):
a few things.
Number one it's touted to onlybe for super fund balances above
$3 million.
However, they have left thedoor open.
Why?
Because it is not indexed and,with all things, tax and
government, once they get it in,it's almost.
It's not impossible, but it'svery rarely ever removed.

(41:37):
Okay, so, first of all, it'snot just going to be for people
with $3 million of assets,because in future, that $3
million, with the power ofinflation, is going to be $2
million, it's going to be $1million, it's going to be
whatever.
It is right.
And so, all of a sudden, youhave everyday Aussies and
everyday workers that are goingto accumulate wealth through
inflation and are going toexceed the threshold.

(41:58):
That's number one.
Number two the concept of taxingunrealized gains is ridiculous,
because there is no liquiditywhen you have not realized the
asset.
So we are forcing people tomake financial decisions simply
to pay their tax.
So, for example, you have anapartment that's gone up in
value through inflation thatwell, let's just go to a house

(42:20):
in Western Sydney.
House in Western Sydney istypically double what we've seen
double over the 10-year period.
So eventually these houses,according to the data, may be
worth $3 million.
Go seek financial advice forthat, but it may be worth $3
million.
You may then have to sell thatasset simply to pay a tax that

(42:40):
has been imposed on that asset.
Do you understand howridiculous it is to enter into a
property transaction just tosatisfy a tax payment that you
have to make?
I think that's ridiculous.
And then my final problem withthis unrealized gains tax is
that it starts in the super fundand then it ends up to the

(43:00):
individual.
There we go, and so I see it asthis Trojan horse that, yep,
we're going to tax super fundsand it's only for the mega rich
and it's only going to affect afew people anyway, and we don't
even whatever this is, we shouldtax the rich, and blah, blah,
blah.
And then all of a sudden itfinds its way into.
Okay, let's do the same thingfor structures, trusts and
companies.
And then, okay, we're done withtaxing trusts and companies.

(43:22):
And then who's next?
Let's go to the individual andsay to the individual owner hey,
you own some crypto that's goneup in value.
Sorry, sorry, mate, got to sellthe crypto to pay the tax.
Hey, you own a property.
Most property investors are momand dads.
We know that because that'swhat the data suggests.
Hey, by the way, yep, we knowyou're trying to accumulate this
wealth and for your kids andwhatever.
That's great, but you're goingto have to sell that because you

(43:44):
need to pay some tax on it, oryou can just find the cash
elsewhere, which they may notnecessarily have.
So it starts at the super fundand it's a slippery slope very
quickly to the everydayAustralian person and, before
you know it, two generationsmaybe from now, you have an
unrealized gains tax for regular, everyday Aussies who are just
trying to make ends meet.
It's the boiling frog, that'sright.

Speaker 2 (44:04):
Yeah, it's.
Keep them in there, slowly,turn the temperature up.
The frog has no idea.
And then all of a sudden thefrog is born.
That's right.
I actually really like thepoints that you bring up when it
comes to unrealized gains tax,because now you have to sell the
property to potentially be ableto just pay a tax and there's
so many things around this.
My key issue with it is thistax, I'm almost certain, was

(44:30):
introduced by Labor.
Not sorry, superannuation wasintroduced by a Labor government
.
It was Keating in the 90s thatcame up with it.
So he brought in thissuperannuation and Liberal was
against it.
Liberal was against it.
And then you've had people gooh you know what, if I purchase
this in my super fund, I'm notgoing to develop it, I'm not
going to do any construction,I'm not doing anything like that

(44:51):
.
This is just my block of landthat I am now using to be able
to own a farm, okay, to be ableto provide resources in
Australia.
Now, all of a sudden, that haschanged.
I do not like the fact that wehave a government bringing in an
extra 15% for unrealized gains,whether this comes in or

(45:12):
whether or not I understand theindexation and everything.
I think that this is a silverbullet for Labor to get voted
out, because if they bring inmore taxes, do you know what's
going to happen?
Victoria is going to be like,yeah, we get to work from home
30 days a week.
Everyone in New South Wales isgoing to vote the other way.
That's all that's going tohappen, because eventually,
people are going to get sick todeath of it.
People want to make money.
People miss the fact that wehad a prosperous economy back in

(45:34):
2018, 2019, 2020, even duringCOVID, I understand we were
printing money like no, tomorrowwe have to pay it back.
But people miss being able togo outside and have
opportunities, okay, and byhaving this economic roundtable
to discuss productivity.
I think that is the discussproductivity.
I think that is the right move.
I think that is the right movebecause these guys they did

(45:55):
everything they could to getvoted back in and now they want
to introduce all these things.
No, get fucked.
Sorry, I keep cursing.
I understand that I've got ason.
He's going to see this one day,but get fucked, okay, because
it is not fair to the averageAustralian punter and with that,
we'll be right back.
So the government wants tobring in all these new

(46:16):
legislations?
What are the top three mistakesbusiness owners will be making
that will end up affecting themin the long run, if any of these
things do come in Absolutely?

Speaker 1 (46:26):
I think, look first.
Ultimately, like we say witheverything, it comes down to
your structure.
You need to structure yourselfin the best way for the goals
that you are trying to achieve.
If you are, you know, low riskand you just want to go out
there and do something to earn alittle bit of money, yes, maybe

(46:46):
a sole trader side hustle isthe right structure for you.
Maybe a sole trader side hustleis the right structure for you.
But if you're someone who wantsto move and shake, who wants to
put on people, who wants toemploy, having a company
structure, having a truststructure in place, own the
shares potentially, you know,potentially having a trust
structure in place, whether it'sdiscretionary, or a unit trust
or a family trust.

(47:07):
Absolutely, but just making sureyou have the conversation with
your accountant before youtransact so that when you do
you're in the best possibleposition, because it's very
expensive to go from structureto structure.
I will go through a couple oflike two more, diego.

Speaker 2 (47:21):
I just want to ask you why is it expensive?
Can you explain the capitalgains tax and why it is
expensive?

Speaker 1 (47:26):
Absolutely so.
In Australia we have this thingcalled capital gains tax and it
doesn't matter generally.
It doesn't matter who istransacting.
As long as there's two partiestransacting and we have a
capital gain event triggered,you pay capital gains tax.
Let me give an example.
You are trading your company.
The shares of that company areowned by you as an individual.
If you want to restructure yourshares of that company to a

(47:58):
family trust that owns thoseshares for distribution reasons,
you have to pay capital gainstax when you dispose of your
shares and sell it to yourfamily trust, even though you're
related people.
And so a lot of times peopleget tripped up where they go out
.
They build this company, it'smaking money and it's good, it's
got value in it and they haveto now pay capital gains tax for
them to restructure theiraffairs when, if they won, the
company had no value.
You could have set it up with atrust owning shares and
mitigated a lot of that headachelaid down the road.

(48:20):
If you do, it's not the end ofthe world, but it is going to
cost you more, because you dohave to go and get a valuation
for your shares, you do have topay capital gains tax if there
is any.
And then you have to weigh uphey, is the capital gains tax
I'm paying now better than thetaxes I might pay down the road,
or not?
One of the second mistakesbusiness owners make is not

(48:40):
paying themselves in the correctway from their entity.
And I'll give you an example ofthis.
A lot of people start companiesand say, yep, I'll just start
the company and they're used tobeing a sole trader where they
can just move money around,throw it around, no one really
cares.
Then, all of a sudden, they'veripped out money out of their
own company.
They've never paid a wage,they've spent a lot of their
personal.
They heard Bob at the barsaying, yeah, just put

(49:01):
everything through the companyand you'll be right.
And they've built up thismassive director loan.
Because that's what money thatyou take out, that you haven't
declared a wage or a dividend is.
It's a director loan.
So you've taken that money outof the company or you've spent
it personally on the company'sfrom the company's funds.
So you have this director loanto accompany yourself and there
are tax consequences that goalong with having this money

(49:22):
that you've taken out becauseyou haven't paid a wage, so
there's no tax that's being paidon it.
You haven't paid a dividend, sothere's no top-up tax that's
been paid on it.
So now you are forced into thisDiv 7A loan agreement.
It's a big headache for me togo through.
It's complex, but ultimatelymake sure when you start up a
company, pay yourself a wage.
Then, out of your profits,consider paying yourself a

(49:42):
dividend.
Do not just go and rip outmoney and think that it has no
tax consequence and that it'snever going to come back to bite
you.
That's number two and numberthree know your numbers.
You would be shocked how manybusiness owners I speak to every
single day that say hey.
I say hey, what were your saleslast week?
And they say, oh, I actuallyhave no idea.
If you don't know what yoursales are, how can you know that

(50:05):
you're running a business thatis profitable, that can grow,
that can pay staff, that can payoverheads, that can do all
these things?
What the heck is the point ofgetting into business when you
don't understand the finances?
Warren Buffett says thatfinance, or accounting, is the
language of business andunfortunately, when you get into
business, you have to be acrossthis and you have to understand

(50:25):
your numbers.
Because I'll give you a quickexample, and then I'll wrap it
up.
I had a client book me in twoweeks ago and they say, jacob, I
feel like the wolf of WallStreet.
I've put out this ad on Metaand it's blown up and I'm
selling like crazy and I don'tknow what the heck I've done and
I'm just selling so much and Isaid, okay, just do me a favor

(50:48):
and book me in for a meeting sowe can go through these numbers
with you.
We went through the sales price, their direct costs that go
into producing the product orservice that they were making,
and then we went through theoverheads.
Do you know what happened bythe end of it?
They were actually losing moneyon the sales that they were
making and they were sendingthese ads to the moon.
And so if we hadn't got in inthat two week period, they would

(51:10):
have booked up two years ofrevenue, making a loss.
Do you know what's worse tomaking no money, losing money?
Okay, so imagine you go.
It's better to just stay at homeand do nothing than it is to
make a sale or make a loss onthat.
Anyway, by the end of theconversation we rediscussed
their margins.
We went through it all.
We negotiated their directcosts and they had a plan to go

(51:35):
back and negotiate the directcosts.
They had a plan to increasesales.
I said listen, you know what'sfunny?
I said how many people weresaying yes to your offer?
And they said all of them.
Whenever that is the case, youhave a pricing problem Because
you price too low, correct, sonot everyone should say yes to
your service or offering.
So anyway, we rejigged theirpricing, we rejigged their
direct costs, we rejigged theiroverheads.
Luckily they had low overheadbusiness and now they can go and

(52:00):
scale in a profitable way withnumbers that they understand and
that reward their good work andtheir hard work running this
business.

Speaker 2 (52:05):
That's a fun example.
I love that story because whenI first started, I didn't know
my numbers.
Yeah, now I've had to build outa full break-even analysis every
single time I hire someone,every single time.
Well, you know we get aroundbonus time every single time
that you know we're about toinvest.
You know purchasing furniture.
It's knowing your numbers andknowing what you have to work
with and what your operatingcosts are.

(52:27):
If you don't know what youroperating costs are, you're
going to get hit, and you'regoing to get hit hard.
Okay, if you don't make sureyou make sense of everything
along the way.
And I absolutely love that keybit of advice.
It's general Don't go and youknow, changing anything without
speaking to your financialprofessional.
But I absolutely love that.
The last question I do want toask you today if you were to see

(52:51):
something?
Okay, and they approached youand they were a sole trader,
okay, and they said to you jacob, I really want to buy prada
sunglasses and I want to claimit in the business.
What would your reaction be?

Speaker 1 (53:06):
uh, you know what's so funny about prada sunglasses
specifically?
Yeah, that if you're aconstruction worker out on site
and you're in the sun, or ifyou're a teacher and you're out
on school duty, maybe the fullamount may not be deductible,
but if you're in the sun andthey're protective and they're
not just designer, they actuallyhave some function to it.
Part of it could actually betax deductible.

(53:26):
So on that specific example, Iwould go through those facts now
.
If that same person came to meand said, hey, I've got a trip
to europe booked or I'm goingout and buying my c63 or my
whatever it is, insert m3, youknow all the cars us people in
western sydney love to buy wewould have a different
conversation and and that wouldbe, let's make some money first.

Speaker 3 (53:50):
Yeah.

Speaker 1 (53:50):
Let's make sure your business is profitable first,
let's make sure you're achievingyour goals and dreams, and then
we can think about buying theyou know, all these things, the
fancy stuff, the fancy stuff,and the fancy stuff isn't tax
deductible.
Okay, because if it was, well,it would add value to the
business.
And again, I can tell you it'snot going to.

Speaker 2 (54:12):
I do have to make you laugh.
My wife told me the other dayshe's got a conference in Paris
and she turns to me.
She goes it's a tax expense,it's tax deductible.
And I go, alison, I love mywife to the heart.
Do you know what that means?
That's all I said to her.
Jacob, it's been absolutelyfantastic having you on.

(54:33):
I know we've gone over time.
Your phone has gone off.
I don't even want to look atthat absolutely so.

Speaker 1 (54:38):
Uh, on instagram and I'm now on tiktok.
Uh, I've held it off for aslong as I could, but I'm a
tiktok.
Apparently you still don't knowhow it works yeah I'm still
trying to work it out.

Speaker 3 (54:47):
I'll give you guys a a lesson, don't worry.

Speaker 1 (54:49):
That's it, so jacobfarmy on Instagram, and
then my TikTok is jacobfarmytax.

Speaker 2 (54:56):
I need to rejig that username, but that's what it is
for now, Anybody who wants tobook in with Latitude
Accountants or yourself what'sthe fastest way for them to be
able to reach out?

Speaker 1 (55:04):
to you Absolutely.
Check out the websitewwwlatitudeaccountantscomau.
You can book in.
You'll get a call from our BDMwho will sit down, discuss your
scenario and book in a call withone of our lovely client
directors and you'll be able toget in touch and we'll go from
there.
But whatever your situation is,if you're an ABN holder, you
get a free discovery meeting togo through and make sure you're

(55:27):
taken care of.

Speaker 2 (55:28):
Thank you so much for coming on and, as always, if
you need help with your financeswhether it's your sorry if you
need help with your lending,whether it's purchasing your
first home, purchasing aninvestment property or
purchasing within a trust, youcan contact us at
wwwitsimplecomau.
I want to thank you all forlistening and Jacob, looking
forward to the next podcast,because that was too much fun

(55:49):
Pleasure.