Business & Finance With RBK Advisory's Jason Robinson

Tommy: It's The Daily Talk Show, episode 691.

Josh: Welcome to the show, Jason Robinson. All right, I'm already saying Mr. 97.

Tommy: There we go, Jason Robinson, accountant extraordinaire, PGA Advisory. How are you? Sorry, not PGA Advisory, we're very fucking RBK. Oh my God, this is a night. This is an absolute— another client. It's a client.

Jason: Restart. We're not live. We just restart.

Tommy: Yeah, again, advisory to advisory. Jesus Christ.

Jason: Ah, mate, that's all right. No, really good, man. Thanks for having me. I thought we'd agreed I was going to be show 700. I thought that was the big one that we'd lined me up for.

Tommy: Well, only if you show us your back, your current back situation. What were you just showing us before?

Jason: Oh geez, I thought that had come up if I did something silly like show you guys this. This is my back knobber. I was knobbing my back. So yeah, thanks. Thanks for, uh, calling me out straight away. I've got a sore back and I'm out in Raymond Island at the moment, so I don't have access to my local physio or massage lady back. So yeah, I've been self-caring.

Tommy: That's good.

Josh: Did you, uh, can you— did you buy that on the island or that's an import?

Jason: No, no, that's, uh, went for a trip to the local, uh, Kmart in Bansdale and hooked myself up with my back knobber. So really, I mean, correct. Yeah, that was essential. That was an essential, essential travel. I'm not too sure who came up with the invention, but I'll tell you what, in desperate times and when you're in need, I was pretty happy with the purchase.

Josh: Mate, you said this is Christmas time for accountants. What's the vibe like this year versus last year this time? Is Christmas a shit fight? Is the uncle, is the annoying uncle here and he's actually just really pissed and picking on people? Or is it, you know, it's—

Jason: Yeah, look, for a bit of background, RBK Advisory, an accounting firm in Melbourne, a couple of partners started a few years ago. We've got a decent team of nearly, I think, 25 of us in the accounting side. Xero Accounting Firm of the Year. So to give you a bit of a scale of the size of what we're doing and the clients that we work with, small business clients right down from sole trader to big companies. And for the Christmas time for accountants comment that I made was it is carnage, like with stimulus and JobKeeper and JobSeeker. Seeker and all of the things to do with COVID-19. It's just nonstop. It's relentless. And the amount of announcements, like you guys as business owners have felt yourselves, it's even rent relief. There's all these things that keep coming and keep changing. And all these businesses are trying to do is survive and get through the current climate.

Tommy: What's the biggest thing that's changed, do you think, in the way that you guys were operating just a few months ago to now?

Jason: Well, like, like you guys, you're all operating out of your own homes on, on a video screen rather than being in a studio together. We've, we've done the same thing. All of our offices are, you know, empty. So we're in Richmond, Hampton, Black Rock, Narre Warren, site down in Geelong and Torquay, and over in Perth. All of those physical office locations are empty, and our entire team works from home using Slack, Teams, Zoom, Xero, you know, to communicate with ourselves and with our clients. So that's the biggest change from a physical side. The other side is like all other business owners, you know, we're reducing costs, looking at how we communicate, looking at how we can do things differently. But I guess the benefit for us is— the benefit for us, we were already working in a way where we could work remotely. We already had our team members work from home at certain occasions. So this was kind of not really a hard transition for us. I guess the hardest part is then transitioning our clients, the ones that still were used to doing face-to-face meetings, going, "Guys, we can jump on a Zoom call and still see each other face-to-face and talk about how we improve your business and how we can help you right now." And because of the current situation, they had no choice but to jump on a Zoom meeting or jump on a call. And they went, "Wow, this is actually pretty good. I can still see you, I can still talk to you, you can still help my business, and I don't need to come into the office to see you." So if anything, it's going to change the way we do things. You know, 3, 6 months from now, I don't think we'll have as many onsite meetings because people will be comfortable with the new way of doing things.

Josh: Yeah, but I mean, I like having coffee with you and the Mentos at the office where you were is quite, quite actually appealing. Jason, what's your emotional connection and do you have one to money? I think we all do. It's probably fair to say. As an accountant looking after a whole range of people's businesses in different health, you know, levels, what is your personal relationship with money?

Jason: Good question. That wasn't in the questions list pre-show, so—

Josh: My relationship with money.

Tommy: We sent you the Gronkh questions. Now you got to deal with our questions, which includes everything, as you can tell.

Jason: My relationship with money, it's not so much I don't need $1 million, but I don't need $10,000. There's a level of comfort you have from working hard and getting a return on the value that you give. So it's a value exchange for the money that you earn. And then what you do with that money. I mean, if you've got no hobbies, no pastimes, you know, you don't like to travel, you sit at home and you've got a bank account full of cash. Like, it's what does that actually mean to you?

Josh: Holy shit, you're just talking about Mr. 97.

Jason: So, yeah, relationship with money. Look, I love what I do, and then earning money as a return for that is, you know, it's part of the parcel. I mean, I'd probably do what I do if I earned half. I'd probably do what I do if I earned 5 times as much. And the relationship with money then becomes about if I'm okay with money and good at talking about it, and then I can help clients be better. I guess there's a satisfaction and enjoyment that comes from working with money all day, every day, and working with business. Owners and I guess improving their relationship with money.

Josh: I think— Sorry, JJ, I just wanted to follow up. You see, I think you see people who treat sort of business like a game. So there's that less emotional attachment to it where they're able to make decisions that aren't really connected to, you know, the dollar figure and it removes some fear. What, for you, have you— like a psychologist that has people talking about, you know, tragedy a lot— have you got a thicker skin? Do you care less about— you know, it's not caring less, but it's like, yeah, do you see it like a game where you can, if you play it right, you can make more, or you make less if you don't play it right?

Mason: What do you—

Josh: what's your sort of— are you black and white towards it?

Jason: Not so much black and white. I think I think a lot of the book Think and Grow Rich, um, it's about having that desire and where you're going and what your direction is. So if you've got a roadmap on where you want to take this to— some people create a business to keep for them forever, and that's their baby, and they treat it like their baby, and they nurture it and love it, and they get really emotionally into it. Others sell in 5 years, 10 years, 20 years, or to make money off and not have to work in the business. So I guess it's the understanding of who you works, what they're trying to achieve, and that forms the conversation because it's going to be different with every person.

Tommy: Yeah, uh, your, um, your internet's a little bit cooked, Jason. Do you want to jump on to, um, uh, 4G? I'll cut to our 3-shot. Um, so we can, we can just wait for a second.

Josh: So, have you done last year's tax return? To— have you actually?

Mason: Yeah, I have. I think I did. I think I actually did it pretty quickly. Like, I, I don't know, there's— I usually, like, as soon as it, it becomes available for submission, I'm, I'm pretty much on to it.

Tommy: Do you do it all yourself?

Mason: Yeah, but yeah, it's, it's— I mean, I don't have much to do anyway, so like, it's a pretty easy— it's not like it's complicated. I think this year will be more complicated with like just with like the shares and all that sort of stuff, it becomes a little bit— I don't know what you have to do there.

Tommy: Yeah, I mean, it's the working out how to like what advice to take, what like— it serves— how do you reconcile that you're doing the right thing?

Josh: Uh, Google. I literally just—

Mason: there's— it's just for me, it's just searching online and just finding all the all the different things and sort of just going from there.

Josh: Welcome back, Jason.

Tommy: How you going, mate?

Josh: Mason's mantra is Google before Pape. Don't listen to Scott Pape if he tells you a piece of advice directly to your face. Just don't take it.

Tommy: There we go, Jason. I think that could be better. The cat's moving, so I think that's a good sign in the background.

Mason: It's a good sign.

Tommy: He's back. So with RBK, I was curious about the B Corp stuff. So what is B Corp for people who don't know and how and what does it take to get that status?

Jason: Yeah, sure. B Corp's a certification that your business acts in a certain way in relation to community, environment, how it spends its profits. So effectively what B Corp is saying that it's okay to be a business that makes profit. You don't have to be a charity or a business that puts all its profits into, you know, one particular charity or one particular kind of giving back. What it's saying is that it's okay to be a business for profit, but it's how you use those profits and what you do with them. So the different elements, I guess, for us were our relationship with the environment. So, you know, our encouragement of reusable water bottles, using KeepCups, donating money to certain charities, and then a percentage of our profits going back to charities, our culture internally and the values that we operate by. There's all these different things. But for any business owner that, that I guess wants to operate in a certain way, B Corp and its code of conduct and the way that you have to operate to be a B Corp, I'd highly recommend people have a look at it. Um, it's in the process. It's like, yeah, it's, yeah, it's— look, I think, you know, Jono, one of, one of our business partners, he, he ran with it and worked really hard for it. But it was like a 3 to 6 month process of— they tear your organisation apart. They want everything and anything, basically what you had for breakfast 6 months ago, where you bought that breakfast from, how much you spent on it. But there's a lot of detail that they go into where, you know, you open up your organisation for scrutiny. And they will get— they gave us the feedback of, you know, you can't do that, or you shouldn't spend your money there, or you should change banks to be with a more ethical bank. That, but actually as an example. But yeah, things like that. So look, I think it, it makes us a better organisation today and also puts us in a community of like-minded businesses. So, you know, right up to the level of your Patagonia and your Etsy and your Stone and Wood Brewing to be able to be associated with businesses of that kind of, I guess, you know, that kind of level. And then RBK Advisory is one of, I think, 3 accounting firms in Australia that is B Corp certified. So, you know, puts us in really good field and a really good land to be working with great businesses that are in that community.

Josh: I know it's the burning question on Josh's mind. What was it that you had for breakfast 6 months ago and how much do you pay? Where'd you get it from?

Jason: Smashed avo, hopefully with a bit of pomegranate, because I love that fresh burst of pomegranate when it goes off in your mouth. Yeah, it's probably paid too much.

Tommy: Yeah.

Jason: Yeah, and probably from Pillar of Salt across the road from the Richmond office.

Tommy: That's right. Um, we got some questions from the Gronks. Uh, before I get to that, I just wanted to say, since moving to you guys for all of our accounting, I feel like TJ and I have been able to relax as much as you can relax from a financial point of view. Like, the, the shitstorm that's happened with all the COVID-19 stuff Knowing that not only for us being able to know what happens, but even Bree's getting emails or whatever with his updates and like it's made such a difference. So I think it's— so thank you for that. But also it's great that you're willing to answer some of the gronks questions around this stuff too, because it can create a lot of friction and pain in people's lives.

Jason: You're welcome, mate. A pleasure having you guys aboard. It's always been It's like collecting good businesses or collecting people to come along and work with us. We want to work with good people. We want relationships, which I guess is one of our big things. We don't just want another number. We don't want to just take dollars off someone and hand them a BAS or a tax return at the end of the year. It's the ability for you guys to be able to drop us an email or give us a call, drop in for a coffee and enjoy a coffee together, strong-armed latte, whatever it is that we're going to be having at the time. Very good. Happy days.

Mason: Very good.

Jason: Yeah, I mean, that's what it's about.

Josh: Just before the questions from the Gronks, I think it blows my mind, like, property managers, real estate agents, like, there is such a consistent level of shitness in all of them. And I've had 4 other accountants that I can say they're all like, they're all had their elements of dog shit and averages. And so Like, it seems like you're just going the fundamentals, uh, relationships, work with good people. You know, it's not just about like— these seem like the simple things that I think majority of people are missing, and it's, yeah, it's sad. I don't know, what do you think it is?

Tommy: Well, it's like communications, the communication, the emails, you know, it's huge.

Jason: And communication internally as well. Like, I'm— we're very fortunate, we've got a great team, great business partners, great team, and We communicate well internally, which then empowers our people to be able to communicate with you. Because I know, for example, Tava and how he works with you guys. I might not be across all of the correspondence, but I see it all. Tava loops me in, he updates me so that if there's something that I wasn't involved in, I already know what you guys have asked Tava and what he's responded back to you. So yeah, communication is that huge part of it. Without communication, we can't do what we do. And I think that's where unfortunately some accounting firms don't do that. Um, you know, they may focus on other things like being really gifted technically with, you know, their ability to apply GST tax law, which doesn't necessarily excite you guys.

Tommy: But I also think like, um, the classic is an accounting firm becoming big and then you end up left with a junior burger doing your books. Whereas I feel like what's great, um, with what you guys have done with RBK is it's you're actually giving us specialists. So even though we're not working with you as a director all the time, Taver actually knows more about Xero and all of that sort of stuff than you in some cases. And so knowing that even the people around you are actually in a great position to give us feedback as well.

Jason: Yeah, we learnt that from experience from previous accounting firms when we were the junior burgers, my business partners and I. And you know, when You just got to learn from those experiences. And then when you create— we created the business, it was laying down the foundations and the rules of how we wanted to operate. And like, you know, I'm not going to be available all day, every day. So having someone who knows your business and can work with you is important. But it's also still being involved. Like, if I brought you guys on and then completely checked out and went, I don't need to look after these guys anymore, you know, we wouldn't be the business we are today and it wouldn't be growing and continue to be successful like it is.

Tommy: That's awesome. So Aaron asked, uh, I'm a freelancer with a US client. I'm registered for GST. Can I invoice them in US dollars and do I need to include GST? Can I reflect it differently so they aren't confused by the tax?

Jason: Yeah, so look, that's a couple-part question and definitely not as simple as an answer I was kind of expecting. Um, when I put my head around it. So GST payable part of it, generally depending on what he is providing offshore, is generally a GST-free export. So he wouldn't have to charge GST on those services or products he's sending offshore. When it comes to putting the invoice in US dollars or AUD, depends if there's a GST component, you would have to reflect that in the amount of Australian dollars payable. So it is expected that you would then need to put on the exchange rate for the GST if you were going to say it in not Australian currency, because you do need to have it as Australian currency. So you can invoice someone in US dollars from your Australian company and then they can pay you in US dollars. But if there is a GST component, you need to include the Australian dollar payable amount of GST on that invoice.

Tommy: So it couldn't just be 10%. So it couldn't just be like a US— the 10% of the US amount.

Jason: No. So I've got a little statement. So you have to put something, for example, the GST is calculated in Australian currency at the exchange rate published by the RBA at time, Australian Eastern Time, on the business day of the date of this invoice. Like, that's how complicated they make it. So to answer Aaron, it's not as simple as yes, no, maybe. It's what services he's providing. If he does have to charge GST, then he will need to include that extra information. If he's not charging GST, it can be, you US dollars, GST-free. But you're happy to chat to Aaron afterwards and kind of break it down with him specific to his circumstance.

Josh: And so I think, yeah, like the, I mean, yeah, TJ, go on. I was just gonna say, with all of this stuff, as you've said, who is someone who has your head around a lot of things to do with money and finance and tax, is like, did the, does the tax department have a gronk clause where they're like, Of course, you know, an operator who is not really that savvy, they're, you know, their bread and butter is drawing on a piece of paper for clients and it's not doing crunching numbers. Is it like if you did do the opposite, is there a way to then back, you know, alterate what you've done?

Jason: Yeah, look, the ATO is definitely not the bad guy. They're pretty lenient in a sense that if you can explain why you did it, there wasn't, you know, you weren't deliberately deliberately frauding the ATO and the government. They're people that want to work with people. I know a lot of the time you can get someone pretty shitty on the phone from the ATO, but it's again communication. Talk to them about what happened. Talk to them about why you did it a certain way. And if you're not good at what you do, then I guess the expectation is that you will go to a tax agent or a BAS agent and you will seek help to make sure that you get it right. Because unfortunately, the Australian tax system unfortunately, is a self-assessment system. So if you are self-operating and just making decisions yourself, and then you sign your tax return at the end of the year, it's on you to know whether you've been doing it all properly if you're not going to go and seek advice from professionals.

Tommy: On the GST, this is quite a basic one, but I can't remember what the answer is. I feel like it would help a lot of people. When you buy something for a client, so for instance, say you buy a hard drive there's GST on that you want to get reimbursed. When it comes to putting that reimbursement on the invoice, do we have to add GST again, or is it the exact same amount? How do you sort of do that?

Jason: So if you bought a hard drive for $88, just to make the numbers really easy, on your books it's going to be an $80 expense and an $8 GST credit. So then when you charge the client to, to receive that, you need to charge them $80 plus GST. So you're going to receive $88 in and you've recovered your $88 out. I think where some people kind of overcomplicate it is they go, I spent $88, so I'm going to charge $88 plus GST. So you've ended up collecting more than what you're actually out of pocket.

Tommy: Okay. Yeah, sure. Samantha asks, what should I be asking my accountant? In regards to JobKeeper?

Josh: Good one.

Jason: Nothing. Leave your accountant alone. No, no, no. Seriously, joke. So Samantha, depends on whether you're an employee of a business or whether you are the business owner. If you're the business owner, there's a whole kettle of fish. You need to know that registrations opened yesterday for JobKeeper, so you can apply for your business to be receiving those payments. Your business needs to have reduced 30% in revenue either March versus March, April versus April, or there's a few other the tests that are still coming out. And before the end of April, you need to ensure that you've paid your eligible employees more than $1,500 a fortnight, at least for the two fortnights, if you are going to be asking to be reimbursed by the ATO in the first week of May. It is huge. There are so many Ts and Cs around what an eligible business looks like and what an eligible employee looks like. So I guess, look, you need to be asking for as much information as possible, and if your accountant's not available to give it to you, it's— the ATO is trying to make this as simple as possible. They've broken it down into 8 steps of how to claim the JobKeeper on the ATO website. But again, you've got to jump on, have access to the Business Portal or access to myGov, and be able to flow through this application. And they do word it in confusing terms. I had a sole trader client yesterday say, you know, well, what does it mean by I need to have lodged by 12th of March? Much, and they word it in a real complicated way, and it's like, well, either if you haven't lodged your 2019 tax return, you need to make sure you've lodged a couple of BASes so far this year, and if you haven't done either of those things, it talks about making basically an application to the ATO Commissioner for their discretion to say that you can still claim. And if you're an employee, I guess it's communicating with the business owner or the business you work for and talk to them saying, you know, I would like to be on JobKeeper. Are you eligible? Are you going to imply— apply? And then the employee fills out an employee nomination form to claim through that business owner. Um, yeah, well, it's a long-winded answer to, to the crazy JobKeeper thing, but I think it was good. It's—

Josh: I was just going to say, I think, um, as an employer— as an employee, it would feel like you were It would feel uncomfortable because you don't, like I'm having the conversation with you about JobKeeper, and as a director of the business, it's only one step from me to you to then understand this stuff. Whereas I get the sort of frustration or the feeling like you're unsettled based on not understanding, is my boss going to then interact with the finance department that then interacts with their accounting team that then interacts with the, you know, the government, which is— and so it's like, fuck, even if you do send the email asking about JobKeeper, that's where it'd be like, yeah, shit, is it gonna happen? Are they that far down the track? Understanding that literally it's yesterday that it's come out and said, yep, now you guys can actually put your applications in. And so it's like, I guess it's now— it's like applications are actually open, so they should be submitting them if they are. And so you're hoping that you get you know, truthful answer that isn't just, you know, trying to comfort your feelings, and then it turns out that's not the case, right?

Jason: The joy of this is that applications opened yesterday, but if you're going to be eligible, you need to have your application lodged by the 26th of April. So anyone who's kind of sitting back going, "I've got plenty of time to do this," applications just opened. If you want to be in that first round of payments in the first week of May, you've got until the 26th of April to get your application in. Dot your i's, cross your t's, sort out your payroll, do your single-touch payroll, employee nomination forms, the whole shebang. You know, for anyone who— you know, you don't have to be an RBK client. Our blog on the website has these steps broken down as well under the JobKeeper update that we posted. So you can grab some, you know, helpful information there and then take it on your way and sort out what you need to do. But so you've only got till the 26th of April for business owners out there who want to be able to apply for JobKeeper and lock in their first payment in May. But the thing that everyone needs to understand is it's a reimbursement for the money you've handed to employees already. So you need to have paid $1,500 per fortnight, and then you're putting your hand back out to the ATO to be reimbursed.

Tommy: And so, because I think that like the other interesting thing is that because this is so public, every gronk is hearing the news and obviously going to their employer and being like, hey, am I eligible for this or that? So for instance, there, there's like I've got a mate who works a few out, like a younger dude, works a few hours at a pool, would only get $50 a week, and sort of rubbing his hands together like, I'm gonna be, I'm gonna be cashed up, I'm making, gonna get 1,500, uh, you know, off this a fortnight. Is it for, like, is that a possibility? Like, does, does that then mean the pool company would have to, um, or, you know, the, um, facility would have to back pay him that $1,500 per fortnight?

Jason: Correct. So if he's been a casual employee for more than 12 months, the pool facility applies for JobKeeper and says, we want to be able to give JobKeeper to our eligible employees. They would need to pay the pool boy who would have made $50, $100 a week. They need to give him $1,500 a fortnight to be— to then claim that $1,500 a fortnight back. This is where it's caused a bit of, I guess, angst for employers So you imagine, you know, the fish and chip shop, the cafe, the restaurant that may have 20 casuals that would earn $200 a week, and all these casuals are calling the business owner going, "Hey, I heard that I'm entitled to $750 a week. I want my JobKeeper payment," without actually understanding that this poor business owner who's struggling to make ends meet because their business is shut down or next to shut down doesn't have that $1,500 in their pocket per fortnight yet. So, you know, for example, a business with 10 employees needs to find $30,000 in spare cash before the end of April, pay all those employees, and then wait for the ATO to hand that money back. And the government's saying, "That's okay. Go to your bank and get a loan." And I don't know about you, but going to the bank and getting a loan in this kind of climate is not seeming like a very easy feat at the moment. So yeah, it's complex. So Samantha's question's a great one. It's hot on the lips of a lot of people out there that either business owners or employees. So it's relevant to everyone.

Josh: Well, I think, Josh, that example was like the ripe end of the stick, if that's the analogy of the opposite of the raw end of the deal. Well, you're getting the point. The raw end of the deal being—

Tommy: You're cashing in at that point. Oh, you're massive.

Josh: It's massive. Yeah, it's massively advantageous for those people that are in that position. But so the raw end of the deal is people who, you know, like in the arts industry where they make little bits of money here and there and they're, you know, contracted for 3 months at a time. There's been a lot of sort of complaints from seemingly, uh, wealthy arts people that are getting behind this, you know, conversation around like, oh, don't forget about the arts and stuff like that.

Tommy: Well, because they're talking about the crews, right? Like, they're— you've got the super wealthy, like, arts people who then employ a bunch of people.

Josh: I guess it's, it's, you know, that part, which it's so funny because I see that and I understand it's like, fuck, that is so annoying and it would be tough. But then I think about us as a small business and the way we've tried to do it correctly is very fucking painful. Like, for us to be able to get the three of us onto JobKeeper, that means we would have to have paid superannuation every single quarter, like PAYG, and it's like That is super tough, and the trade-off with doing it like that is a lot of fucking friction. And so it's hard at this time to— for people that walk out with the raw end of the deal that might have just done some casual work coming in and out, it's like, on one hand I get it, and the other hand I don't, because it's like there is also the JobSeeker payment, which is a non-taxed version of the JobKeeper. We still have to pay our income tax on that, right? And so the other end, so hopefully, so the JobKeeper, is that a taxed payment? It's not a tax payment? I did say that, but is that correct?

Jason: Yeah, it comes into you guys as income that you'll declare as revenue into your business, and then because you pay it out to your employees, it should be netting itself out. So there'll be an income coming in and an expense going out to the employees.

Tommy: And so the employee, will they see $1,500 or will they see— so that's post-tax?

Jason: Yep. So you'll need to post it through payroll and payroll will calculate how much tax to withhold on the $1,500 for that employee depending on their circumstances. So $1,500 is the gross amount. But, you know, for example, Mason may end up with $1,350 in his pocket and $150 will be tax withheld that will appear on his payment summary at the end of the year.

Tommy: What does super mean in this, this time? Obviously people are pulling out their super. Is super contribution still happening with, with this payment?

Jason: Yeah, so if the employee was stood down and they weren't going to be earning any money and then you reinstate them to give them the $1,500 JobKeeper, that $1,500 is like— there's no super payable on that $1,500 if the employee was stood down. If the employee was already still working, you were always going to continue to pay them their salary and the $1,500 is helping to subsidise their salary, you will still have to pay super as per normal. So there's a few different rules around that, but yeah, I guess the important one is if the employee was stood down and they weren't going to get any money and you brought them back on just to give them the JobKeeper, your business won't be further out of pocket because of JobKeeper making you pay super.

Tommy: Um, we've got another question from Ben who says, can I instant tax write-off an iMac to my side hustle freelance business? I'm a sole trader.

Jason: Yeah, so you know, you're working under your ABN earning some money on the side. Um, perfect example, you've raised $10,000 worth of invoices and collected $10,000 at a tax rate of I'm just going to make it easy for myself, 30 cents to the dollar, you know, average rate of tax for Ben. He would have owed an extra $3,000 at the end of the year on his tax for his $10,000 profit. Now if he goes and buys a Mac, and I'm going to make it even easier, he bought a $5,000 Mac, what that happens there is that instantly deducts off his $10,000 profit. He's left with $5,000 left over to pay tax on. He pays an extra $1,500 tax. So he saved $1,500 by going out and buying the new asset, that he was able to write off using the accelerated depreciation rules for the instant asset write-off. Does that make sense?

Tommy: Yeah. And so, I mean, one of the complications that I never got my head around was around if you are an employee and you have a side business, which is becoming more and more common, the working out, okay, I've got my phone bills, I've got all of these things, how do I split them up? Is there sort of a rule of thumb in regards to how to do that?

Jason: So it comes down to you're meant to keep a diary and then a log of how you use your assets, whether it's for using it for your employed job as an employee and then using it on your side hustle. So it's really important to keep accurate records of, of your use of that equipment or use of your phone and internet. Let's say if you're using your phone not really much for work to earn your wage because your work provides you with the ability to make calls through the, the work system, but you're using your phone flat out on your side hustle to use it to hotspot, generate income, phone calls, emails, text messages, you'd record how much of your phone bill per month is dedicated to working on that side hustle, and you'd claim that percentage of your phone bill on your tax return against your side hustle income. And the ways of doing that is printing off your phone bill, highlighting all the phone calls, keeping a log and a diary of how long you were using your phone for, let's say hotspot and data. But the better your records are, and the more records you keep, you know, the easier it is to sleep at night knowing that if the ATO ever came looking and said, hey, we want to know why you claimed 80% of your phone bill, you know, if you've got records that reflect that you're on your phone all day every day, your calendar reflects that, your diary reflects that, and you've printed off a few months' worth of phone bills that you can highlight 80% of it as work-related, happy days.

Josh: Yeah, I mean, you hear that, those kind of storeys of people of the tax department coming, the example you just gave there, how often are you actually seeing this where they're coming to people and going, alright, cough up the info?

Jason: Not often. I'd like to think, you know, the way we operate and the way we educate our clients of the records that they need means that, you know, we've got a real clean bill. Look, that still happens. I mean, there's always just audits that happen because they pick a name out of a hat and you have to sit there and explain to the ATO why you claimed what you claimed. It's not super regular, even— excuse me— even in previous accounting firms I've worked for, it's not like 1 in 10 tax returns gets audited. I mean, you think about the size and scale of our country and our economy and how many tax returns are lodged, and then think about how it would be possible for the ATO to even look at, you know, 10% of them, 5% of them. If I had to put it in numbers, I don't even think I could. I wouldn't even be comfortable putting into numbers, but it's not a regular thing. And if you're doing the right thing, I guess it's something you don't have to be too concerned about. The people who do the wrong thing, my general rule of thumb is it's going to catch up with you eventually. The HOA audit period can be extended for a long time, and if you've done something wrong and they find you, they'll keep going back and back and back to dig up as much as they can. And I guess for their end, the beauty of their system is You're guilty until proven innocent when it comes to the lodgement of your tax returns. If they turn around and went, "Actually, we think you were collecting an extra $50,000 a year tax," they will lodge an assessment that you were receiving that extra $50,000 a year tax, and then it's up to you to prove that you weren't.

Josh: Oh, how annoying. I mean, Grant Smiley, who you would have danced to his music quite a bit Jason, back in the day, like myself. Yes, we were at his restaurant in LA and he was telling us that he has audit insurance, which is quite common over in the States. Is that something we do here? I'd never heard of it before.

Jason: Yep, definitely. So where, you know, audit insurance, for example, um, okay, let's use you guys for example. You guys pick up audit insurance, you might pay a couple of hundred bucks for it, um, and then the ATO sends us a letter and says we want to review that big media company have paid all their superannuation on time. So if you or I then had to go and spend hours digging up bank statements, paperwork, printing out Xero records, and then sending that to the ATO— let's say I did that on your behalf and I raised you an invoice for $800 for spending several hours of my time dealing with someone from the ATO acting on your behalf for the audit— you guys have got to pay that $800 invoice for my time If you had audit insurance, I would send my $800 invoice to the audit insurance company and you guys would sail off into the sunset a couple hundred bucks better off because you had audit insurance.

Tommy: So it's not a get out of jail free card. It's not like if you cook the books, you just— you're covered with the insurance.

Mason: No.

Josh: Yeah, it kind of is. Just because you literally just covered Jason's problem.

Tommy: It's his time, baby.

Jason: Yeah, you're only covered with basically your accounting fees. You still, if you did something wrong, you're still going to pay penalties to the ATO. You're still going to pay charges, you know, underpaid GST, underpaid income tax. You'll still pay everything that you were required to pay by law. You're still going to be copping that. The only thing you're not—

Josh: Come on, bro, come on, just do a couple years for me. Just do a couple years in jail for me. I'll do 2, you do 2.

Jason: Clean as a whistle. Nothing touches this. You guys sign everything. If anyone goes down, it's 97.

Josh: No, no, it's all running above board. I mean, this is why, like, all you have— like, to be honest, I could do that thing about the super with zero. Like, these programs, these subscriptions are game changer. Like, like ridiculously game changing. Like, I can press one button, it'll print off everything for, for us. I mean, you would know where the button is. I would have to ask you where the button is, but you know what I mean?

Jason: And there's a charge for that. There's a charge for that question. I don't know. And look, that was a real simple example. Look, the ones that get complicated might be a business that has 7 motor vehicles and they haven't lodged a fringe benefits tax return and they let their 7 vehicles— they're taken home by staff members that drive them to Mount Buller to go snowboarding on the weekend. And all of a sudden, the ATO comes along and goes, well, those 7 cars, someone's getting a benefit from having those cars in their driveway. Driveway at home, somebody has to pay tax on that fringe benefit, and we're auditing you to figure that out. Now, going back and figuring out how those 7 cars were used, if you don't have good records, where are the logbooks, blah, blah, blah, all of a sudden that's a lot of work for someone to complete, and there's a lot of liaising with the ATO to go back and forward to get those records correct. So that might be a bigger example of where, you know, you don't want to be spending too much of your time or your accountant's time digging through those kind of things.

Tommy: I mean, people are working from home a lot. There was a question from Tim saying, I'm working from home more as a business owner. What's the tax implications of this? I guess as a broader question to sort of extend this, what are the tax benefits of actually having an office? Like, we're considering, maybe we spend, like, if we can free up $35,000, $40,000 a year in leases and have it at home. What are some of the considerations with this type of thing?

Jason: Good question. Let's talk about it from, let's say, an employee who's working from home now and is using their home internet and, you know, electricity, gas, whatnot. The simplest version for them is the ATO have upped the rate to $0.80 per hour. So you record how many hours you're working from home from the 12th of March to the 30th of June. Let's say you're working from home for, you know, 40 hours a week, the 13 weeks times whatever it is.

Tommy: What happens with a family of 7 who works at home? So say like mum, dad, all that sort of thing, like does one person claim it or can everyone claim it?

Jason: Everyone who works from home on their tax return can claim the 80 cents per hour that they've worked from home. So that's a real— I mean, that's a bit like the set rate for driving a motor vehicle of 66 cents per kilometer. What they do is they try and make it easy 80, you know, you calculate your hours worked from home and you multiply it by 80 cents and that becomes the tax deduction on your tax return. As an employee, that's the most available record— most available option for you. As a business owner, that's where it gets a little bit more complicated. So working from home as a business owner, which was Tim's specific question, then goes down into do you own your home or are you renting? If you own your home and you elect to claim the operating cost of your house, so you're claiming a portion of interest, phone bills, electricity, gas, internet, you know, all the running costs of your home, and you, let's say, you know, you say your office is 20% of the size of your property, and you claim that on your tax return. You claim 20% of the total cost of your house on your tax return. What happens then when you sell your house is that you have to pay capital gains tax on the portion of your property that was earning, helping you earn income. So that's where people who work from home who own their house have to be really careful with how they claim tax deductions for their home office. Because again, if, if as soon as you're using your home to generate income and you're claiming it as a tax deduction, there's big issues when it comes to capital gains tax and the kind of records you're keeping and the tax you're paying when you sell your house one day. If you're a business owner and you're working from home and you want to keep that neat and clean, that's where you go back to that 80 cents per hour method and then claiming a small percentage of, let's say, the the bills that are actually attributed, like phone bills or internet, which is our personal taxation rather than the company.

Tommy: So with that doing it at the personal tax level then?

Jason: Yeah, you want to be claiming it as a personal tax level to keep CGT free from your house.

Tommy: Okay, and so what would that look like? So the capital gains tax—

Jason: complex area.

Tommy: Yeah, so that means that like, um, is it looking at your previous books and saying, okay, you've made 'x' amount of money in a bit, like how does it actually work?

Jason: It doesn't matter what you've made in your business. It's the percentage of your house that you treated as a business asset, as a business use. So to a real-life example, you bought your house for $500,000 and you decided that 20% of that was going to be used as your home office where you work, whether it's running a business, doing tax returns, doing childcare, whatever you're using that 20% of your house for. 10 years later—

Josh: You're saying I can turn my son into a business? Can I just say I'm a childcare worker?

Jason: 20%? No comment live on air. Let's talk later. No. 10 years down the track, your $500,000 house is worth $1 million. You've made a $500,000 capital gain. Now, if your main residence was your main residence and you've never used that to generate income, you sell your million-dollar house and it's tax-free. That's your house. You've lived there with your family. You don't have to pay tax on that $500,000 profit you've just made. However, you've run a business there for the time you've owned the house. You've claimed 20% of those costs on your tax return. On that $500,000 capital gain, 20% of that now needs to go on your tax return for the ATO to tax you on. So $100,000 of extra capital gains income goes onto your tax return now. There'll be discounts and other things that I won't get into to bore the pants off the viewers at home, but that's why it's real complex. Like, you don't You don't want to just go and claim all this stuff on your tax if you don't understand the consequences, especially for, you know, claiming home office expenses just because— and look, that'll be a big one now with a lot of people turning to work from home and realizing, geez, I can run my business from home. Maybe I'll just claim, you know, all this stuff on my tax return, not realising that a few years down the track you could really, you know, shoot yourself in the foot when it comes to other tax consequences.

Tommy: Are there a few of those ones? Like in regards to, like I guess there's a lot of things that are being offered up right now. It's like taking out your super. What are some examples of things that look really good right now in the short term that in 6, 12, 18 months' time or even, you know, 50 years' time if it's super, will actually be problematic?

Josh: Yeah.

Jason: Look, I think, look, touching on the super one, $10,000 in super at the moment. So if you were to put— let's say rather than take $10,000 out, you put $10,000 in. I think Scott Pape uses the example of someone in their late 20s, early 30s puts $10,000 into super. That's the equivalent of around $90,000 to $100,000 when you get to retirement age. Now reversing that, if you go and pull— again, for full disclosure, I'm not a financial advisor, don't hold a financial advisory license. This is just general friends talking about super here. If you take $10,000 out of super now— because it's tax-free and you think you can prove that you're under financial hardship. You take $10,000 out now, what you need to think about is, if I can't put that $10,000 back in, am I comfortable having $100,000 less dollars when I retire? Because I guess when you think about it as $100,000 when I retire, it's more than just, "Oh, I can have a quick win and get $10,000 now." In saying that, if you are under financial stress and you need that $10,000, talk to your financial advisor, talk to your accountant, and figure out, is that the best option? Are there other—

Tommy: oops, your audio.

Jason: And no, no, um, but that's, that's it. The biggest one at the moment I think is super, the early access to super. There's a lot of people, uh, 10 grand out and spend it just because, you know, so I don't really like super and I don't really understand it. I think that would be, I guess, one of the big things, you know, for the 25 to 35-year-old clients and even sometimes beyond, is there is a lack of appreciation for what the super environment does in the tax, tax world, how, what $10,000 now is $100,000 later and how that works in compounding. Outside of that, I mean, look, I don't know, crystal ball-wise, all of stimulus, the JobKeeper, JobSeeker, working from home, we know it in a way. And I look forward in a way to seeing us come out the other side of this in 3 or 6 months as an economy and as a country and react and push forward. A lot of opportunity for the people who look at it the right way. And there's a lot of like really bad things that are happening that is happening. I feel for a lot of people out there that are going to lose livelihoods.

Tommy: Do you mind just chucking it on, uh, Wi-Fi real quick? The question that I want to ask in regards to that super stuff was in relation to pulling out super with the idea of then, uh, I've heard the cases of people getting it then, like, you get it tax-free and then being able to do things like reinvesting it the way that you want to? We'll just wait for Jason to— Oh yeah, perfect. The people pulling out the super and then doing their own investing with the idea that it's— they're not getting taxed or whatever, or they're getting taxed at a lower rate, the tax benefits. Have you heard of situations like that?

Jason: If so, superannuation is taxed at 15 cents to the dollar. If you pull super out and you're going to invest the money in your own name, our personal tax rates are as high as 45%. So it really depends on what you're earning and what your personal situation is. I don't recommend that at all. I mean, most people are going to be hovering— you know, most people are going to be earning, you know, $40,000, $50,000, $60,000, $70,000, $80,000. And when you're earning more than $37,000, you're taxed at 32.5 cents to the dollar. On your earnings over $37,000. So if you pull your $10,000 out of super where it's taxed 15 cents to the dollar and you start investing it yourself, you're going to be taxed 32.5 cents to the dollar on those earnings as an average, as an example. I think that's where not enough people work with a financial advisor at any age, really. I mean, a lot of people just wait until it's a couple of years from retirement age and go, "I should talk to a financial advisor now and see what my options are." Whereas getting it right in your late 20s or early 30s means you can go high growth and you can really lock in some good earnings for 20 years before flipping back to a more stable investment portfolio, which again means talking to a financial advisor. But I mean, that's the options that are out there. I mean, you don't need to just kind of sit super off to the side and go, oh, I can't touch it, so I don't need to be interested in it. If you are interested in investing and you like the stock market or property or, you know, ETFs and different portfolios, Talk— you know, you can actually invest your super with your financial advisor in a way that makes you excited, and you can watch it and see it grow. And I guess having that relationship with it might make you a little bit more excited about it. And then using it for tax deductions— I mean, you know, you put $10,000 into super as a tax deduction, and it lowers your taxable income and stops you from paying as much taxes as you would.

Josh: Papi— Scott Pape has his sort of questions to ask a financial advisor, or your current one.— I mean, to find a good one. In terms of accountants, what do you think the questions to ask an accountant, if someone's listening that they don't have one yet, they've been lodging their own things, but this is sounding too confusing, they want someone who has the knowledge to be able to look after submitting their tax return every year. What should you ask an accountant?

Jason: Good question. Asking an accountant, you know, to explain something to you that you're generally interested to understand. A lot of people don't understand how their taxes work, how Medicare levy is charged, their HELP repayment. They kind of just hand over their documents, get the result at the end of the year, and don't understand it, and sometimes walk away a little bit like, 'Oh, my refund was less than last year,' or 'More than last year, I don't get it.' But 'But I'm just going to deal with it because it's just been handed to me and I'm meant to trust that.' If you ask questions, how is that explained to you? So having a genuine interest in your taxes and how it's calculated and how that's understood, you want to be able to have that explained to you in terms that you can understand. I guess as well, knowing how you're charged, you know, is if your tax return takes 15 minutes or 1.5 hours, is it the same fee? Are you charged a flat fee, an hourly rate? Do you even care how you're charged? You know, questions for an accountant. It's— I guess it's what, you know, throwing it back to you guys. What are questions that you were interested in asking an accountant? And I guess as business owners or individuals, it might be a little bit different. But yeah, I'm curious. I mean, I know we had some pretty decent chats at the start.

Tommy: I think it's the real-world problems. I want to just have like start actually testing the relationship rather than than it being some sort of hypothetical, actually showing our books and saying, "Hey, this is what's happening," or, "We're having this issue here," and seeing how we can all problem solve together, I think was super beneficial.

Josh: Yeah, the communication, getting a response is always nice. But no, just actually being able to talk through your situation. And I guess it's different though, because our need as a small business at this stage is different to what it is for a freelancer who has the mindset of, I'm not making enough money to need an accountant. And so that's— but then at that point, it's like those people probably also say, I'm not making enough money to justify paying $50 a month for Xero, which I think is massively remiss not to invest in something like that. But yeah, I mean, what do you think? When do you think it's appropriate for somebody somebody who thinks that they can do it themselves like a Mr. 97, or should go and seek, you know, guidance from a business like yours?

Jason: Look, a business that's worth its weight in gold will— there will be a value exchange. So, you know, Sevs, if he does his own tax return, I'm pretty confident that if him and I sat down doing next year's tax return and I looked back at last year's tax return, we'll identify things that were opportunities that were missed in his circumstance and his scenario where we'll be able to optimise his return to either get him a better return or fill it out more correctly so that he feels more comfortable. I definitely think all professionals that are good at what they do are going to be— there is going to be a value exchange. So I guess it's if you don't— if you think you don't make that much money and you might not need a tax accountant or a tax agent, having that initial conversation to say, "Hey, this is my circumstance. Do you think you can help me?" and have that conversation and see if of what the potential is. You're going to work it out pretty quick if there's something that you're missing or something you're going to learn. And you know, to hand over a couple of hundred bucks to get a tax return done and begin a relationship— I think that's what's worked really well for us is we didn't have at the start, and even now we don't have a, "Oh, you're too small for us, we can't work with you." So if it's just once a year we sit down and do your individual tax return or your sole trader or freelance tax return. That might be the one touchpoint we have this year, and then it might be another year goes by and we just chat one more time. But then through those couple of engagements and conversations, I guess it's feeling comfortable knowing that if you've got a question during the year, pick up the phone and call me, drop me an email, shoot me a text, and the relationship builds and builds. And all of a sudden you feel comfortable going, shit, I've got that question. I don't know whether I should buy this, or should I be doing it this way? And they'll pick up the phone and call us, and then all of a sudden the sole trader becomes a company or a trust, the freelancer becomes GST registered, we're lodging BASes, we're referring them to our financial advisors to help them with their super fund, but that relationship doesn't start and grow unless you just get on the front foot and engage someone, even if it's for one job a year. So you can start small. I guess to summarise all that, start small, engage someone that you get along with, form a relationship. Relationship so that you can start to ask the questions that you're curious about and not have to rely on, I guess, jumping online to forums and groups and doing all the reading yourself and hoping that you understand. Because man, there's a lot out there. There's a lot out there that even there's days where I have to read it 17 times and go, "Really?

Tommy: Is that really what the ATO wants us to do?" It seems like the financial advisory stuff, I always find a little bit harder in regards to what am I getting. It's a little bit longer term. It feels like there's a lot more sort of bad players amongst that space. Steve asked the questions, what's the difference between an accountant and a financial advisor? And are there people who do both? What's your perspective on how we can say even where we're at with working with you as an accountant, how does it sort of transition on to be sort of the more advisory So there are people that do both.

Mason: I—

Jason: how do I want to frame this? I guess if you had a mechanic that services your car, would you then want that mechanic to also service your boat? I don't know if that's a good analogy or a good example, but just because I'm looking out at a car and a boat, I thought that would make sense. I think—

Tommy: what's the deal?

Jason: Yeah, well, having someone who does your business advice, your tax your tax minimization, your advisory around the day-to-day running of your business and where your business is going, is your accountant and your business advisor. A financial advisor focuses on things such as your superannuation, your personal insurances, and I guess your long-term wealth planning strategy, and then even your short-term savings strategy as well for things like purchasing a house. Financial advisory, for example, Those insurances, I guess for you, Josh, you know, you might say, look, I'm not too sure about getting involved in a financial advisor now. Again, it's not something that has to cost a lot of money short term. It's something your super fund can pay for as well. And if invested correctly, you'll more than make your gains back on your super fund.

Tommy: And how do you feel about it? Because I was always funny about that where it's like, okay, anytime I hear accessing super, it seems like it can be this easy decision, but you hear Scott Pape talk about the fee, like, you know, fees and things like that. And I'm like, am I just draining my super?

Jason: Yeah. So there's— if you go to the wrong financial advisor, their fee structure will be too high. They'll suck the life out of your super fund. So you want to make sure you're engaging someone who's going to work with you long term with really low fees and low-cost products that are invested the right way. So again, it's part of that educating and surveying a few providers or talking to your accountant and going, well, who should I work with? 'Can you help me assess the fees in what's involved?' My personal situation, I took a long time to sit down with a financial advisor and do it myself. It was the age-old mechanic's car is the worst car on the road. I was busy. I put it off. I wasn't interested in doing it. But then you see examples like a friend gets diagnosed with cancer and goes through all sorts of shit. And it's like, 'Well, how's that related to my super fund? What does that even mean?' Generally, in your super fund, you're going to have insurances being income protection insurance, trauma insurance, total and permanent disability, and life insurance. If you don't know what portion of those insurances you have— let's say something happens to you, Josh, and you were to pass away. What gets left for Bree? What does she get? Do you have any insurances at all? If you had a mortgage, is your mortgage going to be looked after?— they're the kind of questions that working with a financial advisor, they're going to put those hard questions to you. If you're hit by a bus and you become a paraplegic, do you have total and permanent disability insurance where you'll be paid hundreds of thousands of dollars at the point where you become a paraplegic to help you deal with making changes to where you live so that you have a lift or a ramp instead of stairs? There's all things that happens inside the super realm with these insurances that not a lot of people understand or get. And it's starting to have those conversations to go, these are important. Like, you know, if you don't know if you have life insurance or income protection— the tradie is an example of— tradie goes to work, he's a sole trader, has a missus and kids at home, paying a mortgage, and falls not on the job site, let's say, you know, gets injured and does his knee playing footy and can't work for 6 months. Where does that family get income from? Income protection insurance is an example. If you've got the right insurances, your income will continue to be paid. So they're all conversations for a financial advisor. An accountant can be involved if they have the right licences and can frame the conversation the right way. But the— I mean, they brought out rules around financial advice and who can give it and who can't. There's some pretty strict licencing requirements around that just to make sure, because back in the day, as you noted, Josh, like, it's, you know, you feel like there's sharks out there that are just going to take your money. Money. It's way more regulated now than what it was 5 or 10 years ago. So, you know, those, those bad advisors and sharks are generally disappearing at the moment, and the good ones are kind of rising to the top.

Mason: How do you work with a financial planner when you want to do things like invest yourself, or you've got these specific index funds? How do you sort of keep that control and the transparency and sort of— I mean, because I feel like a lot of financial planners would be like, okay, here's our investments, let's put your money in our investments. How do you work with them to be like, okay, I actually want to invest in this US index fund or something like that?

Jason: Yeah, a lot of it's around the statement of advice. So if they're going to be managing the investment for you, it would be setting the plan on your risk profile, what assets you're comfortable with, and then kind of handing over the keys to them and letting them move forward with it. You can be involved in having conversations with them around chopping and changing, but if you wanted to make quick decisions day to day, a lot of that relies on— because of the rules around statement of advice and ensuring that the, the recommendations they're giving you fit to your profile and fit within the rules, it's a little bit harder if you're chopping and changing your investments day in, day out. So that's something you might manage yourself with a tailored plan that they might help you write and provide you. But if they're managing it, it's kind of managed a different way where it's more not a set and forget, but you're setting up a plan and allowing them to play within the rules that you guys have written together based on your risk profile. An example, so you know, with everything that's happened with COVID-19 at the moment, what's happened in the stock market, my financial advisor contacted Casey and I and said There's an opportunity to move the way your fund is managed. I need to write you a new letter of advice to get you to sign off on it to make sure it's all above board. I've called you to communicate with you. This is why, this is how, this is any change in fees, and this is the benefit we're going to get. But he still needs to go and write that all in writing and get myself and my fiancée to sign off on it. But that's without a financial advisor. Right now, my funds would just be sitting in whatever it was sitting in before COVID-19 happened. And where there's an opportunity in the market right now, who's really acting in my best interest if I'm not, you know, going to be the one that goes out and does it myself? That's where my financial advisor steps up and says, you pay me a small fee, I've got your back, we're going to make these changes, and you're going to be better off for it in the long term.

Tommy: Structures, companies, sole traders, trusts, trusts. There's probably a bunch of people who are sole traders who see, see their mates doing trusts or things like that and think, oh, maybe I need to set it up. Who are they? Like, if you were to describe those structures, what are some of the key elements or benefits for, for each of those?

Jason: I guess as a sole trader or a partnership or any of those kind of structures where you are the personal individual doing the business That's where, as soon as you've proven the concept and you've proven that that's— it's a working business, it's profitable, it's what you want to be doing, the conversation is you don't be stuck in a structure where there is personal liability and your personal assets are up for grabs. As a sole trader, your house, your personal bank account, your personal car, it's all in your name, and the business is you. It's your name. If something goes pear-shaped, you get sued. All that stuff can be up for grabs. Companies and trusts and structures of those realm— we'll keep it simple to just trust or companies. Limited liability, depending, you know, a trust with a corporate trustee and then a company as well. You know, you've got a director, you've got shareholders, you've got a company tax rate. The benefits around that are protecting your personal assets for a company, let's say, and a trust. In a company, you're capping your tax rate at 27.5%. You then need to pay the owners in wages, dividends, you know, there's compulsory superannuation. The costs of running a company are higher, but the trade-off is that you've got asset protection and the ability to do more tax minimization and tax planning with a company. For a trust, the trust does the trading and creates the profit, but needs to be paid out to beneficiaries. So a little bit more complicated in the way that it runs and the way that— well, not more complicated in the way it runs, more complicated in the way it's taxed because there is no tax in the trust because you've got to pass the profits out to beneficiaries. If you leave money behind, it's taxed way too high. So I guess when you start to become more sophisticated as a business owner and look to move from sole traders to companies and trusts and unit trusts and then even getting your own self-managed super fund on top of that,— that's where having a good relationship, having the advisor, having conversations to understand all this becomes super important. We've got a lot of clients that come to us with these structures, and when we say to them, "Hey, cool, you know, why is it done that way? Why have you got this here and the trust there and the company there?" And they turn around and go, "I've got no idea. My accountant just set it up that way, and, you know, I just trusted that it was right." The education part of it's super important because if you're going to be running that structure day in, day out, and you're going to sign off as a director, it's really important that you understand why you're structured that way and what it means if something goes right or wrong, or there's tax to pay and super to pay. You've got to understand your obligations as a business owner and as a director.

Tommy: Makes sense.

Josh: It's, um, I mean, yeah, it's, it's complex in a And it's changing too, because I guess when you start out, you're like, I'll just be a sole trader, 'cause I'm not thinking about the big picture. And is there any detriment to having that approach of like, I may as well get started and get myself an ABN and be a sole trader? Is there a detriment to doing that approach?

Jason: No, in a sense, I mean, that's how majority of great businesses started. I mean, and even at the moment, If you're unsure, or if you're testing the waters and trying it out, and you want to get kickstarted as a sole trader, it's low barrier to entry, low cost. You get your ABN, you get a business name, you can do it all either for free, relatively free online, or a couple hundred bucks, or engage your accountant. Shouldn't be too much more expensive than that anyway, and you're ready to go. You've got a business name and an ABN, and, and you're off. You can start raising invoices for people and doing your thing. Thing. When you're going to set up a company and a trust and whatnot, you are looking at $1,000, $2,000, $3,000 depending on how complex your structure is. And then your annual accounting engagement becomes more expensive. Your annual cost to ASIC becomes more expensive. So there's not a lot of people that rush out on day one forming a brand new business and go, "I'm going to be a company," and hand over all that money. And then, you know, sometimes you get a couple of months in and go, this isn't working, this isn't for me, you know, you go back and get the job, or you go back to working with someone else. So sole trader is more than fine to start off with, but the general rule of thumb is you prove the concept, you prove that it works, and you start to take on any form of risk, assets, and liabilities. You don't want to stay a sole trader for too long.

Tommy: To finish up, Chase, the— um, are you going to—

Josh: I was just going to say, I think Just in terms of debt and business, you look at what's happening with Virgin Australia at the moment. They're $5 billion in debt. I think it was something ridiculous like that. And they are seeking a $1.4 billion injection of money to keep them going. I think the first thought is, how the fuck is a business that scale that far down in debt? And it makes you think, how are they even running in the first place? Is that like, I think, me coming to that conclusion is probably the thing that all dummies are doing right now, is like, "They shouldn't have been running anyway. They're in so much debt." In terms of debt in a business, does a high level of debt mean the business is actually, you know, gone pear-shaped, or is it not that simple?

Jason: Definitely not that simple. Look, there needs to be a great balance between debt and equity in a business. Looking at a business like Virgin Australia, my very high-level understanding at the moment, just on something I saw on Twitter— so don't take this as gospel— is they leased all their planes. So when you lease all their planes, you have a lease agreement that says that you can have this plane for this many years and it's going to cost you this much money. So you multiply that out over hundreds of planes at hundreds of thousands of dollars a year. They've got to make their lease repayments. And the the debt of $5 or $6 billion is most likely— a big chunk of that is their financial obligations on the leases of those planes for the next years ahead. I don't necessarily think it's, it's a $6 billion negative red hole necessarily on their balance sheet right now. If— but it's if they had to pay all those leases out, they owe $6 billion over a period of time. The other thing with Virgin that's Virgin Australia, that's interesting is all its foreign ownership. It's owned by all these overseas, overseas airlines. There's very minimal, if any, Australian ownership, or very minimal Australian ownership anyway. So I think people are kind of kicking up a stink going, 'Oh, don't let a foreign country come in and buy Virgin Australia,' but quite a huge percentage of it is already foreign-owned. Sad to see it happen. I mean, obviously they relied on the day-to-day operations to pay their bills, like a lot of businesses that run up debts and and run up leases and loans and things like that. Big, big interesting case. And also, I think the other thing that gets thrown around is they paid $0 tax in Australia in the way of income tax on profit. Another one of those big foreign-owned companies that paid $0 tax. You know, I think you look at— there was a big list and at the top of it was Apple that on something like $9 billion profit paid $120 million tax. Tax, and then there was a list of 7 or 8 other companies that paid $0 tax. And it just makes you wonder, in billions of revenue and hundreds of millions of revenue, why there is $0 income tax.

Tommy: It feels like this is the time, too, when the government is bailing companies out. This is what they should be looking at. This is the time to sort of cheque and see if they've been supporting the economy in regards to tax.

Jason: Bloody oath.

Tommy: To finish it off, small businesses, business owners, you would be speaking to a lot of them. What's the biggest bit of knowledge gap or one thing that you wish every small business owner knew, or maybe even something that you wish you knew at the beginning of your journey?

Jason: That's what I wish I knew at the beginning of the journey is that is that running a business is so much more complex and so much harder than what you probably anticipate on day one. And you guys can probably attest to this too. The idea of, you know, I like business, or I like business advice, or I like tax, so I should run a business. Everything else that flows on from running a business in relation to, you know, hiring employees, what happens when you hire employees, engaging customers, what are the agreements. It goes off on so many tangents that are so much more complicated than the initial thought of you like doing something, so you start a business, and you think you can make money off it. Businesses are complex. Business is hard. It's definitely not easy. You work your ass off, and you've got to be prepared for it. You've got to really want it, or the businesses that don't work are the ones that didn't really want it bad enough in the first place. That's kind of my personal spin on it. In a more general thing for clients that come to me or clients that come to us, I wish they took more care in a way of wanting to understand things for themselves and wanting to know their own knowledge. I guess it's times like these when things go a bit pear-shaped that you can't just rely on somebody else to do everything for you in a way. And I hope that doesn't sound rude or wrong, but there's, there's a responsibility on a business owner to understand their situation, what they've got themselves into. If they hire employees, employment contracts and agreements and pay rates, that you just got to, you got to be able to understand it and know, know what's going on. And if you don't, engage someone, ask questions, learn more, and work with someone, work together as a team. Your team. And when shit goes pear-shaped, don't kind of blame everyone else. It sits with you.

Tommy: I think that's the massive difference having worked with RBK now is the fact that you promote the education part of it. I think for so long, especially having started a business when I was 14, it felt very hard to ask questions of accountants or they were sort of a closed book or there was all this magic that what they were doing. And I think that what Tommy and I have respected with what you guys are doing is that you actually, you see the power in us knowing and in passing on that knowledge and becoming experts in business rather than just sort of outsourcing and hoping for the best.

Jason: Well said.

Tommy: Um, but yeah, great, mate. It's been so good having you on. I mean, we've been wanting to do it. We thought let's get 6 months down of, uh, uh, you know, working together before we chuck you on to the, to the show. But we've, um, yeah, we— I mean, this is the, this is the sort of conversations that we're constantly having anyway. And I think, um, something like COVID-19 makes you appreciate having a, a great accountant. Are you guys still— are you open for new clients at the moment, or like, is it just—

Jason: yeah, of course, of course. Yeah, look, Look, it is crazy and there will be that kind of, you know, bear with us for being able to be booked in, being able to have conversations with different directors and different client managers at RBK. We're all fantastic at what we do and yeah, the doors are definitely open and we want to be able to help people. So anyone who's concerned or thinks they need a hand and want to reach out, jump onto RBK's site and jump onto the get in touch form and one of our amazing team will reach out and we'll get you sorted.

Josh: So, Seb, can we just start forwarding the mailing list email that they send us out to our gronks? 'Cause they're really handy. They're across everything, to be honest. They're well designed. Love it.

Mason: Yeah.

Tommy: That's so good.

Jason: Thanks very much. Yeah, push 'em out, push 'em out. I'm happy about that. That's great.

Tommy: It's the Daily Talk Show, RBK Advisories, Jason Robinson. Thank you for joining us. We'll see you in the afternoon, guys. Have a good one.

Josh: See you guys.

Jason: Beautiful. Cheers, guys.