Most Small Business Owners Are Paying Too Much Tax

A single conversation at 15 changed everything. Davie Mach chose accounting to pull his family out of debt, started a firm at 26, and built it to 40 people by doing one thing most advisers avoid: telling small business owners the whole truth about money, structure, and risk. 

Davey breaks down the difference between reactive, textbook accounting and proactive, real-time advice powered by cloud tools and AI without losing the human touch. We map the structures that matter in Australia: when a company beats a trust, how a family trust can hold shares for asset protection, why SMSFs are for long-term assets, and where bucket companies and intercompany loans create tax efficiency without triggering Division 7A headaches. If you’ve ever wondered whether the CGT discount justifies holding assets in your own name, you’ll hear the long-game maths that many investors miss.

With a wave of senior accountants retiring and government revenue pressure rising, small businesses face a tougher environment than ever. Enforcement is up, complexity is rising, and yet opportunities grow for owners who keep tight books, review quarterly, and structure for resilience. 

If you run a business, invest in property, or simply want to pay less for better decisions, this episode is for you. Follow and subscribe, share this with a mate who owns a business, and leave a review so more Australians find practical, plain-English finance advice.

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.

Transcript

A Family Crisis Lights The Spark

SPEAKER_02 0:00

My dad actually sat down with me. 15. I'm the youngest in the family. Maybe like you need to focus on making money. I started my own accounting firm when I was like 25, 26. People said I was crazy, they're too young to do that. I remember the accounts had rocked up earlier. I didn't have the room ready, and so it was a mess. And he kind of like really looked down on me. I just realized that man, fire out. I want to prove this guy wrong. For 10 years we've grown business to about 40 people, they're pinning the high net wealth to the poorer people, so they're making them think that it's a fight between them two. But really, the ones that are winning, the corporations. If you're a small business owner and you don't have the funds to be able to pay for the right advice, tax lawyer, or accountant, who do you think is gonna win?

SPEAKER_01 0:36

What should small businesses be doing to protect themselves? Moving forward. Hi guys, welcome to the Finance Show with Joe. We've got a very special guest with us today. He's got over 50,000 subscribers on YouTube. He's got over 60,000 followers on Instagram, and he has become one of the most prolific accountants in Australia because he cuts through the bullshit and he speaks directly to the youth. His name is Davey Mack. Davey, how are you doing today, mate?

SPEAKER_02 1:09

Going good, man. I was half an hour late to this podcast. I apologize for that, but I'm really keen to talk about accounting attacks and just talk about talk to your followers basically.

SPEAKER_01 1:20

Mate, uh, we have followers? What's going on with him? I think we had an audience now. That's awesome. I want the audience to just to get to know you before we start talking about finances and everything. Your firm is called Box Advisory Services. I'm correct in saying that. How did the journey start? Okay, well, I always tell people that I I fulfilled the Asian prophecy.

SPEAKER_02 1:39

Mum and dad told me you need to be a doctor, accountant, lawyer, engineer. And I chose accounting because I was good at maths. Okay. Really, the real story is um mum and dad were poor when we were growing up, and they actually said to me that Davy, like, we need to, we need you to make money. Um we're at a very young age. And I think it was like 15 when my dad put me in. And so I decided like I needed to find a job that would give me the experience to be able to make a lot of money. So I don't have to worry about, you know, the whole order um the thoughts of looking after, you know, my parents and then buying them, paying off their house and the debts that we were in. We were in a lot of debts, and my parents were not very good with finances, so they were actually withdrawing cash out of their credit card to pay for um you know the expenses. So they were doing cash finances. They didn't know how to pay using the case.

SPEAKER_01 2:30

I didn't know that it was a 22% rate.

Starting An Accounting Firm At 26

SPEAKER_02 2:32

And you know, any of that. Wow. And they also then got a private lender um to refinance out the home loan um because we moved a few houses, we my mom got sick and just got went really bad. Um, and then my dad actually sat down with me, 15. I'm the youngest in the family, and he just said to me, like, David, like, you need to grow up and you need to focus on making money. I know education is important, but I need you to focus on like being able to find a job, be able to provide for us because I can't work anymore. Yeah, that happened when I was 15, and it kind of like lit a spark in me. I actually got a bit depressed for a few years as well after that because I just you know, victim mentality, just blame my like why is this happening to me? And so I like I chose accounting because I knew that accounting was a way to know more about businesses, know how to make money, and eventually, hopefully one day I could, you know, start a business, make money, provide for my mom and dad. And that's the journey. Like I started when I was 17 in accounting, got a cadet ship, working in the city, didn't enjoy it. I wanted to focus on small businesses because that was something I wanted to do. And so I started my own accounting firm when I was like 25, 26. People said I was crazy, they're too young to do that. I felt like I was in the industry for too long. I've been in the industry for eight years, like in accounting, doing all the grunt work, learning how to talk to clients, learning my craft. And so I started when I was 26 at being one of the youngest accounts to do that.

SPEAKER_03 4:04

Yeah.

SPEAKER_02 4:04

And now fast forward 10 years, we've grown the business to about 40 people.

SPEAKER_01 4:08

Wow.

Proving Doubters Wrong And Going Viral

SPEAKER_02 4:09

Um, you know, turnover-wise, five mil now. Um we've doing pretty well. And we won a lot of awards, which has been great. Uh, but it's so funny because like I still remember the day where I was a 26-year-old, one of these clients that found me pulled me in a meeting with an older accountant um who was on the other side of the deal. They were purchasing a property, they were doing a loan together, they wanted to do like a joint venture. And I remember the accountant rocked up earlier and I didn't have the room ready. And so it was a mess. And he kind of like really looked down on me. He was like, Wow, like you're you're an accountant. And he was just speaking down on me, and he he he tried to teach me, tried to mansplain to me. And I just realized that man, fire out. I want to prove this guy wrong. I want to be able to like prove it to the world that I know my shit and I know how to run a proper accounting firm, I know how to teach clients everything. And yeah, luckily, um, you know, COVID hit and I was doing videos online and just boom from there, and our social media went a bit crazy.

SPEAKER_01 5:12

Yeah, your social media is one of the best I've seen in the financial services game. Um, the way that you're able to articulate, explain, assist people in digesting what is actually happening in the real world is I would say second to none. Wow. It's who do you have? Who's your competition? It's you yesterday. Truthfully, that because I hear these stories, I know what it is. It's you yesterday. It's not, you don't have competition. You're like, how can I be better and how can I grow?

SPEAKER_02 5:40

Yeah. I'm always trying to improve 1% every time. Like I remember when I started doing videos like six years ago. Um, my video editor, I'm pointing at the uh for at to your video editor. And we my video editor said to me, Davy, I don't think we should post these videos. I'm like, what do you mean? Like, and he's like, like, you're not that good. I think you need to improve it, and I think we should reshoot it. And I said, Stuff that, let's post it. Because I want to like see in the next two to three years how how much I've improved. And if we don't post it, I would not know. And also, I wanted people to tell me what I could do better. Yeah, so I just posted on the internet. You can probably find on my YouTube channel still. I was wearing a blue shirt and I looked like a complete idiot now. And I sounded monotone, I didn't know what I was talking about, but I posted them and I can see now how much I've improved, what I focused on to try to improve. And yeah, people are saying I'm like really good at articulating things. Yeah, I honestly think that I'm still getting better. I can get even better.

Reps, Communication, And Confidence

SPEAKER_01 6:43

But that's the mentality you need to have. Yeah, you can never think to yourself that you're done. Perfection is a dream that we always chase, but it's the journey, not the destination. I don't know. I'm big on that philosophical the philosophical shit. Um, huge on it. There's two stories that you mentioned that resonated particularly with me, and I do want to touch on a couple things because I find a couple similarities in our journey. There was one day I knew I was getting paid the next day, but I had 66 cents left in my bank account. And I was looking in the mirror, it was me, I was looking in the mirror at the gym. You and you, two hands, two feet. You're able, you're young, you can figure this out. Obviously, I got paid the next day, but that was a moment where I was like, I'm really down to my last couple of cents. And you and I grew up in the same area, you know, we're both from Bakesown, that's that's where we're from, you know. The second one was my first day at Macquarie. I was nervous, you could tell, on the day. And one of the guys walks over and he goes, Oh, where are you from? And I'm like, Um, from the Shire. And he goes, Oh, you look like you're from Fairfield. And I just kind of looked and similar, you get that burning desire, and I just said to myself, Yeah, I'm gonna eat you. Like just straight up, like that's it. Like, that's you have this inner desire to be able to both provide but prove to yourself at the same time. I don't know, do you do you get the same vibe as me?

SPEAKER_02 8:05

For for me, I was I actually had a lot of self-doubt. Um, like I grew up in a like firstly, like I grew up in so first I actually grew up in a school that was the you know, grown boys, so it was pretty tough school. Then I moved to Sefton, which is predominantly full of Asians. So I felt like I didn't know how to talk to anyone else but Asians or Lebanese, I'll be honest with you. So because I grew in that area. So when I moved when I worked in the city, I actually felt like I was insignificant, I didn't know what I was talking about. Um, and a lot of people, unfortunately, I was quite extroverted. And a lot of people during um the me working in a professional environment told me not to behave like that way. I still my spark kind of like fizzled. And that's when I I wasn't happy about it. I I felt like I can't succeed in this life, or I can't be able to look after my parents if I'm so quiet and if I don't really learn, or if I don't find the right mentors. And in order for that, I need to get out of my comfort zone. I need to talk to people, I need to actually get with the people that my peers, for example, I need to talk to them. And I found, and you probably saw this when you're working for Macquarie, the people climbing up were the ones that network really well. Yeah, that got the right insights, they had the friendships with the bosses. And I was like, how do I get in that circle?

SPEAKER_03 9:25

Yeah.

SPEAKER_02 9:25

So I quit my job for like six months. I went into cold uh cold calling, I learned how to communicate. I literally got people on the phone for 50 minutes talking to them about smoking.

SPEAKER_01 9:37

What?

SPEAKER_02 9:37

Yeah, that was like my my uh job. I had to talk to survey them for 50 minutes about smoking and what smokes they liked, uh, you know, how much they would pay, you know, how often do they smoke. And I got to a point where I was so good at it, I was actually doing things, those surveys in accents just for fun, just to like get better at uh, you know, talking to people and entertaining people. Oh wow, yeah, and that's how like my I was able to communicate better. That's probably one of the reasons why I've gone better in like you know the whole social media as well. But this is back in the day when I was like 18 to like 20.

SPEAKER_01 10:12

Yeah, but it's all reps. Yeah, it's like going to the gym. Yeah, you don't betch 100 kilos the first time you go to the gym, you don't squat 200 kilos first time you go to the gym. Well, let's go with like 100, okay? Let's go with yeah, that charges a lot. Um, but you don't squat 100 kilos the first time you go to the gym, it takes reps and reps and reps and reps, and then eventually you pull off that perfect squat. Yeah, it's the journey's amazing, mate. I know we said we're gonna be one to two minutes on it, but yeah, sorry about that. No, no, no, no, don't apologize at all. I'm happy because there's so much more we can unpack. I'm bringing you on again. Lynn.

unknown 10:43

Okay.

Choosing To Serve Small Businesses

SPEAKER_01 10:44

That's awesome, man. So tell us a little bit what are the special niches you're dipping into. I know you work a lot with small businesses, but are we moving into the larger, you know, 50 plus employees, you know, net profit above 50 mil now? Like, are we getting to that level now that you've got 40 employees working with you?

SPEAKER_02 11:04

Well, generally that's the way to go, right? Like I went to um a course for um practitioners, uh business owners that are accountants, and they basically asked the question, you know, what type of clients you want? Pretty much nine out of 10 of those accountants chose we want a small number of clients, like 10 and charging 100 grand a year.

SPEAKER_03 11:28

Okay.

SPEAKER_02 11:28

So that's how I'm gonna make my meal. That's what most accountants said. I said, I want the opposite of what you guys want. I want thousands of clients charging, you know, three to five grand a year. And now, like, what the hell? Why would you do that? There's too much risk, there's like too much work. How many, how can you deal with the relationships? And I said, because one, I really like those clients, it's good fun. Like I like to see them grow into bigger businesses. Um, but also, you guys don't want them. There's gonna be a market for it. So let me take on that market. Yeah, and I'm I felt like I was really good at dealing with those clients. Yeah, because they were just the mom and dad pops that I just really cared about, which a lot of people don't care about. That's my market. So I actually don't want, you know, grow uh grow into a firm where we just deal with big clients, and that's kind of the reason why when my uh boss who merged with KBMG and like they sold their business, I left because I didn't really want to work with um bigger clients. I wanted to focus on the mom and dad pops. They're running a family business and they want a lifestyle business that looks after their family. It's weird. Um, you would understand this because I think your family has this too. But us ethnics, like our um our Asian background, the most happiest families are the ones that have a really great family uh gathering all together, and they have like a business that the whole family is part of. And they everyone just works together. Yes, there's fights. Yeah, there are massive fights, but because they see each other every day and they're like building something together for 20 to 30 years, those guys are the most happiest. The memories are created during those 20, 30 year journeys. You remember the time where your mom and dad was owning the cafe or the corner store selling like lollies and used to be the most popular guys selling, like being able to bring your friends to. Yeah, you remember those things. It's true. And that's the most happiest moments I've seen. And I see that because I see my clients go through that, and that's why I want to work with those clients.

Modern Accounting: Proactive, Not Reactive

SPEAKER_01 13:22

So, with those clients, the demographic, they're growing, they're wanting to grow, they're wanting to expand, they've got young kids, or their kids are teenagers. Are you attracting those clients because you're able to speak their language, those that are 45 and under? Or do you think it's more so the dinosaurs of the industry? And I'm just gonna call them that because I have them in my industry too. They don't want them. Like, what do you think it is?

SPEAKER_02 13:47

Is it a mix of both? I think that uh accountants are very one-dimensional. They don't think multi-dimensional when it comes to their advice. And so the way I look at things when I pick up a new client, I look at it, I want to be your accountant for life. And so I need to look at what your intentions, your goals, your future, uh, your future wants, what you're what you want to do with your kids as well. And so I give advice throughout their life, and I give advice now, knowing what your plan is in the future.

SPEAKER_03 14:16

Yeah.

SPEAKER_02 14:16

And so I think that like a lot of accountants, but they learn accounting through a textbook and a textbook that was taught by universities that were written years ago, like 10 years ago, 15, 20 years ago. And the textbook that was written then, back then, was written on the fact that we never had online banking. We had bank statements that were sent to us. So it's very reactive because once you get the bank statements, you have to key all that information into a system, and then we can advise you. So we're advising you based on the numbers that we found for the last 12 months. But now in the future, well, not the future, the present now, so much more different. We can get that data right now from the last 12 months, but we also can get future data as well. Like a AI can pretty much now uh you know forecast what your numbers will be. And they're trying to do that right now. So the advice needs to change. But right now, as you call them, dinosaur uh accountants, yeah, they don't know how to get with the times where they don't know, they're still reactive rather than proactive about the information that's being received. And they still, some of them are still just using bank segments.

SPEAKER_01 15:20

Do you do a lot of RD or do you do a lot of testing yourself? Because I know I've done my fair share of like, not this technology is crap, not this one's actually good. Yeah, we're gonna be using that in our team and stuff.

SPEAKER_02 15:30

Yeah, 100%. Like, I we I I think as a like I call myself a CEO, but I think like my I call myself the janitor. I'm just here to clean stuff up, you know? Well, lately I've been calling myself a CEO because I think that my um responsibilities have changed. I have to like my vision and my goals, like my jobs and responsibility of um managing the business now is uh vision and strategy, uh finding uh the right resources and managing the resources for the team, um, putting out fires for them and um decision making. They're the things I need to do. And one of them is in vision and strategy, making sure that we get with the times, that we don't get competed out of the like the whole uh competition because we're not using the right technology, not using the right softwares to make sure that our pricing and our productivity is always state of the art with the whole industry. So, and I think um five, ten years ago when I built the business, I had one way of thinking about the business, but it's changed a lot significantly.

AI, Tools, And The Human Touch

SPEAKER_01 16:29

I'm always looking for a competitive advantage. That's my biggest thing. And you you saw we're talking about it earlier. Like I taught myself how to self-video edit. That's my biggest competitive advantage because if something comes out, I can do it myself, it'll be uploaded in two hours as opposed to sending it to an editor. No, that wasn't my vision. Send it back, and then there's a back and forth back and you go through it yourself. And being able to do that RD, being able to understand what the pain points of the client are, and being able to discover a technology to be able to assist them, I think that's a massive thing. I think that being able to fulfill that for individuals is a huge thing.

SPEAKER_02 17:03

Yeah, 100%. Like AI is gonna change the world, and especially the accounting industry. It's all about numbers. And if we can uh speed up our process of doing the work and like the low-level work, and then we can provide more advisory work for our clients, it's you know, everyone's gonna benefit.

SPEAKER_01 17:18

I would uh I I I'm gonna I'm gonna argue. I think AI is AI is a tool, but I don't think it's it's going to reshape everything as people are uh indicating. Chap GPT really exploded around 2022. Since then, yes, have there been improvements? Do we have faster speed for loan applications? Are we able to detect things much quicker? Yes. But what I noticed people miss most or what they want most is that customer service and that customer connection. And that can't be replaced.

SPEAKER_02 17:53

Yeah, 100%.

SPEAKER_01 17:54

I'm a big advocate of you utilize AI to improve you, but don't use it to replace you, if that makes sense.

SPEAKER_02 18:02

Yeah, 100%. Like uh before AI, there was like three things that happened. There was like cloud accounting. That was that was new. People were thinking accountants are gonna lose their job as well. Um, and then there was offshore accounting, like you know, you can just offshore to work over to India or Philippines.

SPEAKER_03 18:18

Yeah.

SPEAKER_02 18:18

And that was gonna change things too. And then before that, there was probably something else. Yeah. And but it just makes our job even more better, and we can do more things, which is really what you're saying. Like we can focus on the customer service, providing the best value for the clients, and that's what it's gonna do. What that's what AI is gonna do for you.

SPEAKER_01 18:35

Do you think the accounting industry is missing anything at the moment? Do you think they're missing, you know, new up and comers or people that are excited about this? Because I read a statistic the other day. I think it's 54% of accountants are over 50.

SPEAKER_02 18:48

Yeah.

SPEAKER_01 18:48

Am I correct in saying that? Did you tell me that? Was it someone else?

The Great Succession: Shortage Of Accountants

SPEAKER_02 18:52

So I'm trying to act smart on that one, guys. So uh I uh I saw that uh statistic and ah man, I was like, I was smiling. Like I was like, mate, it's a freaking gold mine right now. Um, what's gonna happen in the next five to 10 years is not even 10 years. I would say next five years is pretty much 50% of the accountants, tax agents in Australia will retire. There's so many regulations that are happening right now with the ATO. Uh, there are so much change in technology, and uh there is a lack of supply of good accountants out there.

SPEAKER_01 19:26

I'm I'm not gonna disagree with you. I've had a bad accountant before run my books. I had to pay a very, very expensive bass bill.

SPEAKER_02 19:33

Yeah, so like they can't find people to do the work. So the they they don't need it anymore. So they will just retire.

SPEAKER_04 19:39

Yeah.

SPEAKER_02 19:39

So what's gonna happen is it's gonna be a like a frenzy. Like there's gonna be clients that in companies and businesses that will struggle to find the right accountant to get the right advice. Yes, they can rely on AI or whatever, but it's just not good enough. Like you need someone with the experience, the education, the right skills to be able to help you. Yeah, and so I I've made it my journey to like try to build box advisory services to the number one accounting firm in uh for small businesses in Australia. Yeah, that's our goal. Like, we want to help as many as uh as many businesses as we can. And so, like I like I have got clients that say, Davey, I like I really want to work with you. And I said, Man, like I I would love that, but there's just so much that I want to do in this world and I want to create impact. And so I need to do this. I need to train my team, you need to work with my team. We need to build a business that can look after everyone. Yeah, because if we don't, like eventually I'm just gonna burn out and I won't be able to look after you guys. Yeah, William?

SPEAKER_01 20:36

Yeah, it happens, man. It happens. I've um I've struggled with it. Yeah, it is something that uh genuinely it is not an easy task, especially when you want to help everyone. You have to remember the average first home buyer in Australia is 37 years old. So I'm assuming you own property, I own property. We are ahead of the mean. I'm still getting people in my ground calling me up and saying, hey, I want to buy my first home. You seem like the guy to contact and everything, but you can't help them all. That's the problem because you might have a small business owner that needs to buy a factory so they can expand their operation and you know they need to be able to complete fit outs. You might have an individual that needs to fund a hotel business. So I think it's two sides of the coin. We want to help everybody, but it's more so we got to find the right people to come along the journey with us.

SPEAKER_02 21:28

100%. And you can't like rush into it. I feel like um back then when I was young, I just felt like I can just do everything. I felt like I had all the energy and time. But now that I've got a newborn, I've got a family now, and I want to spend more time with my mum and dad. That's like they're getting older. It's just hard. Like there's just so much responsibilities you have. So you gotta do it right in the right way, and you gotta build a business that can look after the masses rather than, you know, and make sure the product and service is still great.

SPEAKER_04 21:57

Yeah.

SPEAKER_02 21:57

And don't do it like too quick. So I've actually slowed down. Business just to make sure I can help the clients. Might as well do a mirror. Oh, really?

SPEAKER_01 22:05

Yeah. Very similar, very, very, very similar things.

SPEAKER_02 22:11

I think it's like$500 billion in tax money owed to them from COVID. Like it's it just blew up. Yeah.

SPEAKER_03 22:17

Yeah.

SPEAKER_02 22:18

And now they're trying to find out ways to reduce it because it's just way too big. So they uh they've set up these new rules to make it even harder for businesses to keep trading in solvent like without paying the bills. So they've they created direct dependent notices. Um DPNs. DPNs that go directly uh to the director and make them liable for the taxes. They've created uh garnish ye notices, which then they can go out after their bank accounts and just take money out of the bank account of the business. And the third thing is they've reported it to credit authorities. They disclose the debt, the tax debt to of those companies, small businesses especially, to uh their credit rating industry, which has affected your industry.

SPEAKER_01 23:01

Oh, no, no, no, no, no. So uh this has ripped our industry in half.

SPEAKER_02 23:04

Yes.

SPEAKER_01 23:04

So we uh people can now get tax defaults.

SPEAKER_02 23:08

Yes.

SPEAKER_01 23:08

Okay, on the Equifax scores as well. Um, that's something that pops up. Uh identification is a huge thing now. Um they've gotten uh more stringent, especially when it comes to company and trust-based borrowing. That was uh that was a shit show for the last two years. Initially, I had thought that it was because of buyers' agents in the industry just telling everybody, hey, go set up another company or trust and you know, borrow against that. That was risky lending. It wasn't the core issue that was at play. The core issue in the banking industry or the reason why they started bringing in all these AML Trans 2 stuff is the risky money laundering that was occurring. And we've seen stories in the last two years of, you know, I'm not gonna name the banks because then I could get in trouble to lose accreditations, but certain banks are gonna get fined$250,$300 million.

SPEAKER_00 23:56

Hey, I'm not allowed to say it.

SPEAKER_01 23:59

But uh yeah, cool. They got them fined. Why? Because they weren't reporting these things correctly. Now, I like these rules as well because the difference between our two industries, you're an accountant, that's a four-year degree. I've got a degree on the wall, okay? I studied economics and maths. I didn't need that to become a broker. It's a one-day course, chat GPT assignments, and here's your certificate for go handle someone's passport, tax file numbers, driver's licenses, and go on your way. There's 27,000 brokers in Australia.

SPEAKER_02 24:27

It's growing really fast too.

SPEAKER_01 24:28

Well, all the financial planners, too much compliance there. All right, we're gonna go become mortgage brokers, all the buyers' agents down.

SPEAKER_02 24:34

Same with accountants. Yeah. Accountants are moving to become mortgage brokers as well.

SPEAKER_01 24:38

It's crazy how much of an on-flow effect all this extra compliance has had. And it leads me to my next question. You've had to make a shift from strategic advice to compliance-based accounting. Am I correct in saying that? It's not the shift.

ATO Powers, Defaults, And Cash Flow

SPEAKER_02 24:53

I think it's just that like a lot of accountants, a lot of accountants and gurus that teach their accounting in the shoes say that like you need to teach clients advisory. That's what clients want, advisory. They want to be advised. But before you can advise, you need to know the numbers. And so compliance needs to be done. And so a lot of people forget about that part, that that extra step, that you need to do the compliance work first. So you need to do the tax returns, you need to get your zero accounting software up to date. You need to know your numbers before we can advise you. Like I get calls or meet uh questions with like um, you know, people like businesses or clients uh or ex-clients that used to talk to us, and they always say, Davey, like we never get any advice from you. And I always say, Well, it's because you don't give us the information. So, how the hell do I give you advice? If I gave you advice based on no information, I'm doing you a disservice because I don't know what the frick I'm talking about. And the the advice I'm giving you does might not apply to you. Yeah, and so that's why you have to get the compliance first. And so I actually think now, because of all these regulations that put in place, it's actually made harder for accountants. Um, because accountants are now like they don't want to do all these extra work and they're not getting paid for. Um, they and then clients have this mindset where, well, all this new technology is making it easier for you, you should be charging me cheaper. So there's just this like like a Cesaw that we just need to balance now to make sure that the clients are happy that we're forcing, we're getting them to do the compliance work properly, and then we can advise them after. So I think it just it's a step one and two approach rather than um, you know, we're not focusing on advisory. We still want to do advisory, um, but it's just more like let's get the work and compliance work done first, so you know your numbers, and then we can advise you on what the next steps are.

SPEAKER_01 26:45

My accountant messaged me two weeks ago and he's like, hey, we've got to have our quarterly session.

SPEAKER_03 26:49

Yep.

SPEAKER_01 26:50

And they cost me some money, but like when they said that, it made me really happy in comparison to my previous accountant because I know they're ahead of it. If I've got uh Bass, that's due superannuation. Oh my gosh, if you're late on superannuation, now forget about it.

SPEAKER_03 27:06

Yeah.

SPEAKER_01 27:07

Um, anything like that, it's not an email once set and forget. It's an email, and I'm getting text messages from the EA and I'm in the delivery suite, and my wife's about to give birth, and I've got the text message screenshot. I'm I'm literally in the delivery suite. It was about eight hours until she gave birth, by the way. Yeah. Um, and she's messaging me, she's like, hey, I need you to log into zero right now. I need you to do one, two, three, four. And I'm like, okay, I guess I have to do this. Wow.

SPEAKER_02 27:32

You need to get that stuff done. If you don't do it and you don't get your clients come, uh compliance work done. Yeah, that's where the ATO has put in all these new rules. Well, the rules have been around, but they've create given themselves so much power now that they can affect uh they can do a uh garnish notice and to and collect money from your bank account. They can uh issue a um uh default on your credit report. And when that happens and when that happens, it actually stops your business from running. And until you organize a payment plan with the ATO, then that's when you can actually get back on top of things. But by then, the damage might have been done already.

SPEAKER_03 28:10

Yeah.

SPEAKER_02 28:11

Yeah, and that really affects your business.

Government Revenue Push And Who Loses

SPEAKER_01 28:13

So you mentioned earlier we've got$500 billion in debt from COVID. We've seen a lot of government work pick up, like a lot of the unemployment. So unemployment went from 4.5 to 4.1. And that's because a lot of government sector jobs were created. Now you deal with the tax office a lot more often than I do. Do you believe that they've increased the amount of people that are working in the ATO to increase that revenue as well? And are they being empathetic towards small business owners that have just come out of COVID, that have gone through these interest rate um hikes, that are, you know, dealing with the cost of living crisis, you know, uh pack of diapers. Diapers are expensive, man. Um, like all those sorts of things. Do you think that a lot of that unemployment has moved into there to win back that money or get back that money?

SPEAKER_02 28:59

In honest opinion, like this is just my personal opinion, okay? Like, no one's said anything.

SPEAKER_01 29:04

This is not financial advice.

SPEAKER_02 29:06

So um I think for honestly that the ATO has a big problem, which is that they don't have enough money to run the well, not the ATO, the government. The government itself doesn't have enough money to run the um the economy.

SPEAKER_04 29:20

Yeah.

SPEAKER_02 29:20

And so the government now has tasked, you know, the treasurer to find other ways to to tax people more, to get more tax money to be able to run the economy. And so now one of those rules was like, hey, we're gonna give you um, you know, I I can't remember. Like I think it was like uh one billion dollars. Yes, one billion dollars worth of um tax money to hire the right amount of uh people in the ATO workforce to be able to go after the large businesses as well as the small businesses for the tax debt that they owe. This is talking about international, multinational um taxes and also small businesses. But when you've got a large uh government authority going after you, such as the ATO, if you're a small business owner and you don't have the funds to be able to pay for the right advice, tax lawyer or accountant, who do you think is gonna win? The ATO. Yeah, the ATO. But when it comes to multinational businesses, I'm not gonna name any names, but they've got billions of dollars or hundreds of millions of dollars to fund a legal battle or have get the right tax advice. So they generally are able to get away with it because they know all the loopholes. Yeah. And so who really loses when that something like that happens? Small business. Yeah, and so I just don't think that this is right because I like you know, read a uh stat somewhere that individual taxes in Australia fund 50% of the tax revenue.

SPEAKER_01 30:46

Jesus and crackers.

SPEAKER_02 30:47

But they're trying to find more ways to tax the wealthy, yeah, and they're trying to pin the wealthy individuals against the poor individuals, and so they're creating all these new rules, like you know, trying to get rid of the CGT discount because they're blaming the wealthy that they are the problem. But these are Australians, like me and you, they came from nothing. We came from nothing, and we grew our uh assets and our businesses and income from nothing because we believed in an Australian dream. But now they want to tax us more, and for some weird reason, they're not going after multinationals, multinationals, which have loads of money where they are paying barely any taxes. We've seen it, we've seen it time after time. We've seen the industries that get the most money and get taxed lease, whereas the individuals, the high net wealth, are the you know the bad people.

CGT, Entities, And Uneven Playing Field

SPEAKER_01 31:44

I have been having arguments all day on this. And because I uploaded a video last night, and you know, I'm not I'm not happy about I don't want to get too much into the CGT reform because we don't know if it's gonna happen. But I'm not happy that they have pinned individuals against each other when it's not actually individuals that own 60 properties. I could be a director and I've got 36 companies underneath me, and each of those companies holds one asset, and that is a property. But because I've got all those separate entities, I am then exempt because my companies hold the titles. I am then exempt from the capital gains tax discount. But when I do sell the property, I am applicable for the company tax rate tax rate, which is either 25 or 30%, depending on the way that you've structured it. Am I correct in saying that? Yeah, 100%.

SPEAKER_02 32:38

And and and what what how is that tax rate compared to the individual tax rate? Uh what's the individual tax rate?

SPEAKER_01 32:43

So the individual tax rate depends on the individual's income. And then the sale of the property, it's it's an accumulation, but any property in Australia, well not any, but most property in Australia, you're getting a six-figure profit margin when you do decide to sell. And any the the median salary in New South Wales now is$103,000 or$108,000, one of the two. If you sell a property and you make$120,000 on it, anything that's above that$190,000, you're getting taxed at the 47% tax rate. So what these smarter or people with high-level accountants are doing is they're buying, they're setting up all these multiple entities and they're purchasing in multiple entities all these different properties. They might not be applicable for capital gains tax discount, but they're only getting taxed 25%, 30% on the profit. People think it's on the sale price, or they sold it for a million dollars, they owe us 250 grand. No, they bought the property for 700 grand. Yeah, they put all these expenses through the company, depreciation, interest, all those things. It might not be negative gearing, but they can still deduct a lot and then eventually what's a profit?

SPEAKER_03 33:51

Yeah.

SPEAKER_01 33:52

And now they're pinning, I don't know. We weren't supposed to talk about this, but now they're pinning, you know, mum and dad that's gone and bought two investment properties.

SPEAKER_02 34:00

So they made it harder for the individuals. Yeah. Like they are willing to invest and like, you know, put their hard-earned money to like grow their assets for the greater good of the economy, yeah. And they're taxing them, but they're uh making it easier for companies to make profit, which is the problem of why I do all those videos. Like I do those videos because I just want to make sure that everyone understands the better way of doing things, like the better the way the multinationals are saving on taxes, and I want to kind of educate everyone else.

SPEAKER_01 34:27

Do you think all this blah blah blah and we're taxing this we're changing that? Do you think it's a distraction?

SPEAKER_02 34:32

Yeah, most likely.

SPEAKER_01 34:34

Do you have any tinpoil theories at the moment?

SPEAKER_02 34:36

Oh look, I think that like again, my personal opinion, I think the government are too scared to go after the bullies, and the bullies being the multinationals that have a lot of money, and so they're going after the mass individuals that don't have the money to be able to fight for what they want. Exactly how I said it with um the ATO um having you know one billion dollars to be able to invest and find more tax money and you know claw back the tax money that has been lost, right? They're gonna go after small businesses, they're gonna go after the individuals, the high net wealth individuals that don't have as much power um because they're pinning each other against each other. So they're pinning the high net wealth to the you know the poorer people, so they're making them think that it's a fight between them two, but really the ones that are winning are the corporations that are making most of the money.

SPEAKER_01 35:30

And funnily enough, you see these corporations operate in every major capital city. They might not go by the same name, but you know, there's intercompany.

SPEAKER_02 35:38

Yeah, but then the and and the the main holding entity is not even in Australia.

SPEAKER_03 35:41

Yeah, yeah.

Protecting Small Businesses Now

SPEAKER_02 35:42

Like, what the freak, right? Yeah, like how is that even possible? Yeah, like I I looked at the top 10. Um uh well, I didn't look at all of them, but the top 10 wealthiest companies or individuals, their company's not even based in Australia, they're overseas. Yeah, like they uh owned overseas, but some for some reason, like they and how much tax are they paying when the money goes over there?

SPEAKER_01 36:05

I saw David Pocock's video the other day where we are getting we are paying more in tax on beer than we're getting from our gas exports. And that was the one that I was like, oh that that one that one's gonna come around election time, I think.

SPEAKER_02 36:18

Oh man, you wanted to go there, didn't you, with the gas?

SPEAKER_01 36:21

No, no, no, no. I don't know, I don't know enough about it. Yeah. I don't know enough about it. I've been told there's royalties, I've been told there's this. I don't like commenting, well, I do, but I don't like commenting on that specific because there's a lot more knowledgeable people out there. 100%. And if I start stepping into something that I don't know about, I don't know. I'm huge on conspiracy theories. Yes. Uh my conspiracy theory is there is a reason why these gas companies or these uranium companies or whoever's exporting this stuff is getting this so cheap. And I have a feeling it's got to do with our defense deals because you know, America owns quite a bit of these companies. All right, we'll give you our gas pipeline. We're gonna give it to you as a massive discount, but you've got to protect our borders because we've got one, two, three, four up there, and they can invade it anytime and take everything. That's my conspiracy theory. It's been in my head for about six months now, and I'm living with it, you know? But that's what I think it is. I think all this backhanded deals where, you know, oh, well, Scott Morrison is now a lobbyist for one of the largest companies, but there's always a back-handed deal where the politician they retire or they leave, and all of a sudden they're working a cushiony job and doing tours and all those sorts of things. So it's very interesting. I do want to get back into small business though. What should small businesses be doing to protect themselves moving forward?

SPEAKER_02 37:37

Well, definitely what I said, which is get on top of your compliance work. Um, understanding your numbers is the most important thing. Because of the fact that the ATO now have so much powers, if you're not on top of things, they can really fine you, they can charge interest, and then the interest is not tax deductible. And then they can then, like, you know, put a uh default on your company or your business or your personal name. And then when that happens, it's like pretty much an avalanche that's gonna happen because you can't get the finances you need to run your business. You might even not be able to set up the accounts that you need to be able to, like Amex account or credit card accounts as well as um trading accounts that you need with the suppliers that you have. So that just holds your business. So the first thing is get a right a good accountant to be able to help you out. Um, learn how to even know the numbers yourself. Because, like you said, there's not that many good accountants out there. So you need to learn.

SPEAKER_00 38:32

Oh, sorry guys, I'm sorry to love, but yeah, yeah, yeah. 100%.

SPEAKER_02 38:37

So, well, that's hence why I do the videos because I just can't. There's only so many clients I can deal with, right? And so, yeah, educate yourself. Educate yourself on what you need to do. There's so much content out there now, not just mine.

SPEAKER_01 38:51

Um, you know, there's Hive, uh, what's it Hive Mind? Uh Hive Accountants. Hivewise?

SPEAKER_02 38:57

Hive Wise, yeah, I believe.

SPEAKER_01 38:58

The Greek girl.

Structure For Tax And Asset Protection

SPEAKER_02 38:59

Yes. Yeah, yeah. Yeah, she's just doing it as well. There's heaps of them. There's Charlton's, there's other accountants out there that are talking the right lingo and explaining things for free. And so you get to know more of that, you educate yourself. And I think that the problem with business owners is that they're so focused on making money and putting money in their bank account, they don't actually know how to re prepare the tax returns and financials to be able to grow their business even more. Because we live in a society that requires you to provide those documents, the compliance work, to be able to run your business. Correct. What I mean by that is financing requires you to provide tax returns and financials or pay slips. Um uh getting a uh uh getting rent from somewhere, like you know, if you want to rent somewhere, you need to provide information like an income that you made, you need to provide financials sometimes if you're running your own business. You need pay slips, for example. Um, you know, you're just applying for a loan to buy a proper uh buy a house, you need uh sorry, buy a car, you also need something.

SPEAKER_03 40:03

Yeah.

SPEAKER_02 40:04

So if you don't have that, those documentations, you are gonna go through a like a roundabout way to get there, which might be low doc loans, it might be finding some accountants that might have have to get your accountant's letter, which will cost you an arm and a leg, or you'll have to pay higher interest as a result. And then it just eats into your profit margins and just slows down your business. So if you just get the right compliance work, know your numbers well, you can make better decisions, and you can grow your business properly.

SPEAKER_01 40:33

How can they protect themselves? How can they provide themselves asset protection within their business?

SPEAKER_02 40:39

And how can they ensure that yeah, you're getting into the structuring, right? Yes, but perfect. So I guess like it just depends on like what you're aiming for and your intentions, but um, you know, you've got like companies, you've got trust, uh, and you've also got SMSF super funds. So I guess it depends on what you're trying to achieve, right? The lowest tax rate in Australia, if you're gonna set up an entity, it's not your personal name, it's actually SMSF super funds. So, but the problem with super funds is you can't access their money until you're 60, 60 plus, and you can't um like run a business through it, right? So you only want to put long-term assets in your SMSF uh or your super fund. Um, and when it comes to running a business, you'll look at a trust or a company. I'm a big fan of companies because the tax rate's 25%, and I I feel like the government's going after trust. So I just feel like, you know, there was a rule, there was something that was on the news talking about putting 30% tax on trust. And so if they do do that and they kind of have the powers to do that these days, uh, that would result to companies having the lowest tax rates, uh, apart from super funds. So I'm actually a big believer of using a company, trading company, to run your business and having a trust own the shares of the uh company, trading company, to put for a level of asset protection.

SPEAKER_03 42:04

Yeah.

SPEAKER_02 42:05

Because if everything was in your personal name, you're getting taxed at the highest tax bracket.

SPEAKER_03 42:09

Yep.

Bucket Companies And Intercompany Loans

SPEAKER_02 42:10

But if someone sues you or goes after you personally, not just because you're running a business, but because you got into a fight at the bar and they they got injured and now they want to sue you for medical bills or whatever, they go after you personally and your personal assets. And if your business is your personal asset, they can go after it. So that's why firstly, this is legal advice, so make sure you go see your lawyer. But this is just general information. But basically, that uh a trust means that a trust holding the shares of your business means that you don't own the business yourself personally, your family trust does. Yeah, and so that creates a layer of protection. So those ways are ways to protect yourself. Um, and over time, when you grow your business and your you grow your investments, you don't have everything in those those three entities: your individual name, the trust, and your trading company. You might set up another company that's a bucket company where you can move some of your assets or invest your assets there. Why you'll do that is because you want to keep that away from your personal name as well as your business. Because your business is risky as well as yourself. Um, but a bucket company doesn't do anything but just hold investments.

SPEAKER_01 43:24

With the bucket company, am I able to go find that on ASIC and then find out who the you know director of the trust is or you know who the direct or who owns the shares in that company? Is that still possible when the bucket company exists?

SPEAKER_02 43:36

You can, but you need the name of the company, right? Okay. So like if you don't know the name of the company, how will you find it? Unless you go through the director. Um, but you know, uh there are uh how many Joseph Dauds out there in the world?

SPEAKER_01 43:48

Oh, at least a hundred in Sydney.

SPEAKER_02 43:51

So it takes a bit of time for them to find. It's a layer of protection. But in the end, like uh all these protections, all these layers, all these like companies and trusts, there are all Always a way to get to it. But if they know everything about you, they'll find it.

SPEAKER_01 44:03

Yeah.

SPEAKER_02 44:03

But if they don't know that, it's harder and harder for them to find.

SPEAKER_01 44:06

It's definitely very interesting the bucket company concept. Like I haven't implemented it yet. And I I am hopefully in the near future, but it's not something I've I've rolled out.

SPEAKER_02 44:15

Yeah, and I find that businesses don't get it. Like individuals uh get they get advice from accountants, and the accountants always say, Well, there's that 50% discount. So your tax rate ended going from 47% in your personal name goes down to 23.5%. That's lower than the corporate tax rate of 25 or 30%. So that's better. But that's just like a one-dimensional way of thinking. Because, like I said to you before, was that people don't really sell their investments or properties, or they might hold it for the next 10 to 20 years because they're reaping passive income or making income from it, from their business or from their um investment property. So the result is then while the next 10, 20 years of you holding that asset or that investment, you're making all these profits and you're paying 47% tax in your personal name if you were to own it in your personal name just for the sake of getting the 50% discount. So I'm not a big fan of buying assets in your personal name. But people do that a lot when they don't get the right advice. I had a meeting with a real estate agent who is really successful. She's like 58 years old. She came to me and she said, Davey, I bought, I've got seven properties, five in my uh husband's name to my name. And they're worth like about$10 million altogether. But I'm paying so much taxes because my business is very is doing really well. So I'm like paying myself a salary of$200K. But I have to pay myself a salary of$200K and I have to pay my my husband a salary of$200. Why? Because I've got these loans that I need to pay for in my personal name. So they are paying already 47% tax bracket, right? And on top of that, every dollar they take out of the company, now 47%. But every dollar that they were getting receiving in rental income, they've heard owned these properties for 10 plus years, they'll all positively give 47% tax.

SPEAKER_03 46:06

Wow.

SPEAKER_02 46:07

Because of the fact that they want to get the 50% discount on a sale of a property, which that has not happened. And I asked her, when do you plan to sell the properties? She said, not anytime soon. I'm 58 and she still doesn't want to sell because that's generally what happens. People don't sell their properties, they refinance the money out to buy more assets. Because refinancing doesn't result to taxes.

SPEAKER_01 46:30

No, it doesn't.

SPEAKER_02 46:31

Yeah.

SPEAKER_01 46:31

If anything, a result I'm not an accountant. It can sometimes result to better taxation results because if you refinance and get another investment property, your negative gearing might be higher. You might be able to claim a higher net profit. You might be able to pay yourself a higher salary and then deduct, da da da da. Yeah. Like there's so many things that are involved in that. Also, when you refinance, this is this is an argument I had last night as well. People don't understand that you can do intercompany loans.

SPEAKER_02 46:58

Yes.

Rethinking The 50 Percent CGT Discount

SPEAKER_01 46:59

Okay. So let's say, you know, I own in company one, I refinance company one, I draw down the equity from there. I can then loan that money to company two, and then company two can go purchase the asset.

SPEAKER_02 47:10

Yes.

SPEAKER_01 47:10

Am I correct in saying that?

SPEAKER_02 47:12

Yeah. So uh the company one and company two have the same tax rate.

SPEAKER_01 47:15

Yeah.

SPEAKER_02 47:15

So what you're talking about is um division 7a and like, you know, pulling money out of your business uh and then paying a top-up tax if it was in your personal name. Correct. So a lot of business owners would just make a lot of money, like say half a meal, and then they rip$300,000 or$500K out of their business and then buy an asset in their personal name. The ATO hates that because they see that your personal name is 47% tax, but the company tax rate is 25% and you have not paid the difference. Yeah. So they call that Division 7A and they they make you pay a top-up tax. The great thing is company to company, they have the same tax rate.

SPEAKER_03 47:52

Yeah.

SPEAKER_02 47:52

25 or 30%. So therefore the ATO doesn't care. So you can do that. You can just pull money out. And that's why I was a big fan, I'm being a big fan of bucket companies. I think that bucket companies are what the large corporations that have a lot of money, getting the right expert opinion, are doing. Basically, they own all the assets in the company. Sure, you don't get the 50% discount. And sure the tax rate save about 25 or 30%, which is lower than the um discounted rate when you get the 50% discount. But there are two problems. One, we don't know what the government's trying to do. We we have a feeling the government's gonna reduce the discount or get rid of it.

SPEAKER_01 48:28

I will protest.

SPEAKER_02 48:29

Yeah. And two, um, we don't think about the all the different other incomes that you make while before you sell the property. Correct. Rental income, yeah, uh, income that you make from your business to service the loan, who's gonna pay the taxes on that? And if it's in your personal name, it will be 47%. But if it's in the bucket company or a company, it'll be 25 or 30%. Yeah, but people just don't get it, mate.

SPEAKER_01 48:53

And I think you're doing a fantastic job in educating people. You actually inspired me to go educate people a little bit on this, so thank you for that. Um, I think you've done a fantastic job in doing that because I'm starting to see a lot more borrowers. They might not be your clients, but a lot more borrowers are a lot savvy now. They're thinking about those things. Should I buy in a company? Should I buy in a trust? They're asking me these questions. I can't provide that advice. I can go back to your accountant and speak with them. However, I think the average Australian who's interested in property, who's interested in business, who's interested in these things, because you're providing that resource, I think they are benefiting massively. Davey, is there anything else you want to tell our listeners if they've made it all the way this far into the show? Where can people find you?

Smarter Borrowers And Better Questions

SPEAKER_02 49:47

Where can they find me? They can find me on YouTube. Davey Mac on YouTube. That's my channel. Uh, I'm actually very responsive on LinkedIn. So some people think it's like, you know, my EA talking on LinkedIn, but it's actually me. Um, I don't I do have a marketing agency that helps me with my videos, but I actually do all the post uh the um messaging on LinkedIn. So they can reach me on LinkedIn. Davy Mac is my name. Um, but yeah, I'm always always wanting to help. Um, and people always message me and they always know I'm busy, but I'm always the guy that wants to respond and help people out. Because mate, I remember a time when my mum and dad didn't get the advice that they had, and they nearly went into a point where they had to they got into a point where they had to ask their kids that were 15, 18, and 21 to help out for the family. And I know that if that ever happened to me, like I got a newborn right now, and if I had to ask my kid dad, I I just feel like a failure in business. Like, not in just business, but in life. And so, like, I don't ever want to see that ever again. Like, I want to make sure I can help.

SPEAKER_01 50:57

There's one story I do want to finish off with. Imagine I've got my I've got uh one of so my two ICs on paternity leave. My EA's gone through some personal stuff. I've got one of the guys who asked for annual leave seven months earlier on annual leave. So we thought to ourselves we'd have fulfillment by then, we couldn't find anyone. So it was me on my own in here, and I get a deal dropped on my desk. It was like a miracle from God. I promise you, it was like a miracle from God. This deal was it probably saved the business. And sometimes when you just work hard, you do good things, you treat people with respect, and you are kind, you are kind, and you but you also set expectations. Tell people look, I'm swamped right now, like, but message me at 11 p.m. I'll get back to you. You are kind, you will prosper, and I see so much of that in you, Davy, and I can't thank you enough for coming on this show today.