Mistakes We Help Clients Avoid

1

Overpaying tax

Tax is the number 1 block to growing your wealth over time.

Taxation is normalised theft enforced by the threat of violence. It began roughly 5,000 years ago. Raiders learned to replace one-off looting with threatening for regular payments.¹

This model became the protection racket and eventually the government you see today. They provide some services, but if you don’t pay what they deem you owe, you go to jail.

Now of course I am minimising my tax and if anybody in this country doesn’t minimise their tax they want their heads read because as a government I can tell you you’re not spending it that well that we should be donating extra.

Kerry Packer

Business owners can minimise almost all tax

The system is designed so the people who create the rules benefit and everyone else pays. With the right structuring, it’s completely normal to shrink your business income tax bill to use the system in your favour. It comes down to the cost benefit of how and when to do it.

Example: How to save $1.25 million in tax over 5 years

If you have a business with $6 million revenue and $1.2 million profit at a 20% margin, you’ll pay $300k a year in income tax. If you offset $1 million in expenses per year to an overseas company, that would save $250k per year, or $1.25 million over 5 years.

Investors lose huge returns from tax

The Aussie tax system is a compound killer. It taxes your earnings before, during and after they’re invested. This makes your portfolio grow much slower because of how compounding works.

Example: How 30% tax halves your returns over 25 years

Start with $100,000 and earn 10% a year. Pay 30% tax on the gains each year and after 25 years you’ll have roughly half what you’d have had tax-free. This principle is why investing with a tax-free structure can literally save you millions over the years.

Make the shift to investing with before-tax money

Invest with after-tax money (heavy friction)

Pay tax on money earned, then invest
Slower compound growth
The better you do, the more tax you pay

Invest with before-tax money (flywheel effect)

Use the full amount of money
Faster compound growth
The better you do, the better you do

2

Not using international structures

Australia’s tax system is designed to benefit international exposure. You can either complain about it and wait for change, or use it to your advantage like it’s designed.

How you can pay little tax like big corporations

How do companies like Optus and Santos minimise tax? If you follow the money you’ll find that it’s less about deductions and more about international structuring. They redirect revenue overseas to companies in countries with better tax rates.

You can do the same thing for your business, if the numbers make sense.

Total income$8.32 billion

Income tax paid$0

Singapore Telecom Australia Investments Pty Ltd (owner of Optus)

Total income$5.12 billion

Income tax paid$0

Santos Limited

Source: ATO Corporate Tax Transparency Report 2024–25.

How transfer pricing works

Transfer pricing is when your Australian business pays an overseas related company for services. Normal examples are marketing, technology, software, licences, and intellectual property.

The ATO has strict transfer pricing rules. The price must comply with the arm’s length principle. That means the price independent businesses would charge each other for the same deal.³

But the net result is a reduction in taxable income to your Australian company. If you do it enough, you can pay no tax in Australia. Then, if the overseas company is in a no tax jurisdiction, you’ve saved all tax.

The cost of doing this is running the overseas company well. That’s why you should get help to do it.

E.g. If the overseas company charges $1 million in legitimate expenses, it reduces taxable income by the same amount in Australia. This saves $250,000 in tax.

Using overseas structures badly (e.g. the Bali trap)

Investing overseas can be a great way to earn better returns and diversify your assets. But the structure you use determines how much profit you keep.

If you buy a villa in Bali using a PT PMA (local company) and own the shares personally as an Australian tax resident, here’s the impact on $100 of net rental profit before tax, assuming the standard company-tax regime:

22% company tax in Indonesia ($22), leaving $78.
15% dividend withholding tax on that $78 ($12), leaving $66.
Australian top-up tax of 32% on the $78 dividend ($25), bringing the total shareholder-level tax to Australia’s top 47% rate and leaving $41.

If you’re a top income earner you’d lose 59% in tax on your rental income profits. There are usually better opportunities with your money than this.

3

No number, no plan

Financial freedom comes when your assets produce more income than it costs for you to live the way you want.

Start with your baseline number. This is the amount you need to live well each month or year. Then you can reverse engineer the size of your asset portfolio needed to deliver it. Building then becomes your plan.

4

Spending from the wrong accounts

How you spend money across entities makes a big difference to quality of life and tax paid. It’s important to know what accounts or cards you will use and why. This seemingly simple step can avoid disasters later.

Why it gets messy

How you spend your money creates different tax consequences. If you own several companies, you think it’s ‘your’ money. But if you cross contaminate, it can become a nightmare later to untangle.

Payment categorisations

Loan
Dividend
Consulting fee
Direct fee
Royalty
IP
Capital contributions

Payment type

Bank transfers: BSB and account, Osko, SWIFT, IBAN
Cash
Credit card
Stablecoins
Bitcoin
Hawala

All have different tax consequences which impact how much money you keep versus what you lose. The consequence from the wrong account is messy accounting. Div 7A loans. Impulsive purchases that cause serious tax problems.

5

Good intentions, bad advice & scams

Licenseddoes not equalTrustworthy

Tax lawyerdoes not equalFinancial planner

Accountantdoes not equalWealth manager

Financial plannerdoes not equalMoving money specialist

Bank managerdoes not equalInvestment specialist

A licence does not mean competence

Getting a government licence does not mean someone can get results.

As an example, even the industry for Australian accountants and licensed financial professionals has a history of fraud, taking hundreds of millions from clients.^4–10

Scams

The biggest scams usually come from licensed fraud like banks and fund managers or collective schemes.

Next it’s the social engineering and theft scams. Professionals who build a relationship with you over time to enable trust. Then, when the timing is right, your money disappears, after months or years of a relationship, and you never hear from the person again.

Scams are destructive to life and with modern technology they’re only increasing.

Pseudo tax setups

Be cautious of Instagram posts selling sovereign setups used to hide money.

It sounds nice and it can work. But it always comes down to defence. When there are millions of dollars involved, it’s a certainty you will be attacked by the government. The question is, will they take money from your bank account without your permission (garnishee), or are you protected?

Always assume the government can see your money and crypto.

Your money	Who sees it	How fast
International transfers	AUSTRAC	10 business days¹¹
Crypto debit cards linked to CRS accounts	ATO, via CRS (name and balance)	Yearly¹²
Crypto on Australian exchanges	ATO	Yearly¹³
Offshore bank accounts	ATO, via CRS	Yearly¹⁴
All of the above, analysed with AI	ATO	Days, not months¹⁵

Client story: Social engineering and identity theft using an AFSL

A real adviser with a real AFSL
An OTC desk had a financial adviser who introduced high-net-worth clients to open accounts.
The adviser obtained a client list to offer wealthy clients a government bond investment, like a normal financial adviser does. The product was genuine and the tracking numbers were real. The Australian Financial Services Licence number was real and could be looked up. Anyone who checked, or paid a lawyer to check, would have found nothing wrong.
The problem
It was all fraud. The adviser built a website portal so the victims could see their (fake) holdings. He spent six months building a relationship with each one as their adviser, and provided full records for their due diligence. Along the way he collected personal information, passports, ID and tax information.
He then used that information to open accounts he controlled in the victims’ names. They willingly completed all the ID checks, including selfies, because it was ‘for the investment’.
When it came time to deposit, the adviser gave the victims the bank details of the account he controlled, collected more than $3 million, converted it to crypto and sent it overseas.
The outcome
This is a case of social engineering combined with identity theft. Victims didn’t know they had been defrauded for more than 6 months until the fake website had been taken down. Nothing was recovered.
Just because there is an AFSL doesn’t mean your money won’t get taken. You need to vet behaviour and character to manage risk.

6

Leaving big cash in the bank

The illusion of safety

The risk from a bank is not usually about losing the money, it’s access and control.

1. Compliance risk

AML (anti-money laundering) compliance policies are now commonplace. Banks use them to identify the owner and source of money.

But these processes are proven to be next to useless. Studies show they have less than a 0.1% impact on money laundering and the proceeds of crime.¹⁶

However, they are a strategic lever. It’s a high barrier to entry with vagueness that no one is allowed to question in the name of risk prevention.

The challenge is a bank can freeze your money, block your account, and not give you any reason. No one thinks it’s a problem, until it happens to them.

The bottom line, the more money you have with the bank, the more risk you have.

2. Capital control risk

Banks are proxies for government enforcement. Capital controls are when rules are set in place to prevent you from doing what you want with your money.

Inflation

Inflation is the increase of a country’s money supply.¹⁷ It’s the hidden tax that erodes your wealth. Inflation is used to erode debt. Since fiat currencies began, 100% of them have gone to zero in value.¹⁸

Leaving cash in the bank is a decision that loses money. Better to only have enough in there for operations and living expenses, for say 12 months or whatever you’re comfortable with.

7

A non-useful SMSF

The complaints are usually:

non-proactive responses
accountants handing back work to you
not knowing what you’re being charged for

But an SMSF, when used with the right overseas structures, can deliver a benefit today, legally.

Example

If you have $500k–$1m in your SMSF, generating active cashflow from it you can use now should be a top priority. That cashflow could contribute toward your baseline number and give you options sooner instead of waiting until your SMSF access date. You can do this with the correct legal structures.

8

No plan for when someone dies

What happens when you’re gone?

Copy to come.

Mistakes we help clients avoid