Adrian Raftery is onto his 4th edition of 101 Ways to Save Money on your Tax – Legally! so you can fairly well assume that this is a man who knows how to claim a tax deduction. Being a qualified financial adviser, plus an accountant gives Adrian a unique set of skills when it comes to personal finance he knows just about everything there is to know.
Jason Penna recently had the opportunity to interview Adrian and ask him some questions about his background and what he considers the top three tax deductions that are most often overlooked by Australian Property Investors.
1) Coming from a line of 6 generations of bricklayers can you tell us a little about your story, and what inspired you to break the mold and enter the world of accounting and finance.
I guess the simple answer is luck and being at the right place at the right time. I was the first in seven generations to be fortunate enough to be given high school education. My family background is Irish and lived a modest but happy life. My old man, as the eldest, was taken out of school at age 12 to help my grandfather’s business as his labourer. It was a shame that he didn’t get the opportunity to study because he was one of the smartest people that I have ever met. I guess you can say he went to the university of life. He had a knack for numbers & I remember him teaching about 3-4-5 triangles (remarkably, he never heard of Pythagoras!) and that “5/8ths was a good pitch for a roof”. Whilst Irish living standards have improved tremendously from the 1950s and 1960s, a key event for me no doubt was the decision by my parents to emigrate to Australia in 1971. They had just got married two days earlier and arrived in the country with a suitcase and $100 in the wallet. But they also had a hard-working attitude and an appreciation that this is the lucky country. Dad got a job on day one as a bricklayer, earning good money and not having to worry about missing out on a lot work due to the inclement weather that Ireland is famous for. Apparently he said to mum on day 2 when they bought a bucket of apples from the fruit & vegie shop for 20 cents “Well, we will never go hungry in this country!” They arrived as TPIs (ten pound immigrants) under the skilled tradesmen program back then & dad used to joke that he wasn’t going back til he got his ten pounds worth!
My talent for numbers became obvious to mum & dad during Packer’s World Series Cricket. I was only 7 or 8 at the time and back then they would only show the score at the start of each over. So during the add break between overs, I would calculate what the new score would be for both batsmen, the team as well as the bowler’s figures. If it was a one day match, I would also calculate the run rate required for the team batting second. Who said that you can’t learn watching cricket? Cricket is still my favourite sport (along with AFL & rugby league). My ideal job would be in finance or accounting for a sporting organisation.
“the government introduced the GST, an absolute godsend” – Adrian Raftery
Anyway, as the years progressed, my flair for numbers continued. I just found them easy and excelled in subjects such as maths and commerce. By year 10 I wanted to be a stockbroker and got a few weeks’ work experience via the son of one of dad’s fellow construction workmates. That was in October 1987. Yes I was there for the famous crash. I absolutely loved it but for the obvious reason there were no job prospects in the industry by the time I was ready to complete school. I sat a basic psychometric test whilst at school in Year 12 and was fortunate that our careers’ adviser recommended that I consider applying for a cadetship at an accounting firm because they were a dime a dozen back then & I would be able to fund my university studies whilst getting some valuable work experience on my CV. Pannell Kerr Forster gave me the opportunity and I never looked back. Two years later the recession hit and there were no accounting cadetships for the next five years following. Accounting came naturally to me and it was when I had a brief dabble as an options trader in 1997 – yep during the Asian & Russian crisis – that I realised that I enjoyed accounting & that I was a bloody good one. So I set up an accounting practice and the options traders that I worked for became my first client (I had looked after them as clients when I was at Deloitte & they poached me). A year later when I was looking to grow my business, the government introduced the GST. An absolute godsend as a lot of my competitors elected to retire rather than learn a new tax and it turned off a number of future entrants as well.
If I had any doubt that accounting was my chosen profession rather than bricklaying then the brief experiences that I had as dad’s labourer as a teenager left me in no doubt. It was hard work and I reckon I still have scars from the blisters that I got from those days of helping him out. But it wasn’t all bad. The money was pretty good and I was able to buy my first “computer” – an Apple Commodore 64 – with funds saved from my labouring which helped me to do my first university assignment which was due the next morning! I don’t know what goes through the mind of most labourers but I would have numbers running through my mind all the time. For example, I would work out the exact number of bricks required for each pile and work out how many bricks could be laid which each barrow of mud. I think I drove dad mad and he forced to me to accounting on the day I said “If you didn’t smoke, you could lay an extra …”
“back yourself as nobody can take your education away from you” – Adrian Raftery
Probably the best advice that my old man told me was to back myself as nobody could take my education away from me. If things didn’t work out for me then there was always the wheelbarrow and pick and shovel in the back of his truck. Dad passed away 8 years ago and I cherish the time I had working with him as his labourer & a smile comes to my face when I drive past a wall or a fence or a fence that we built together.
They say that you should reinvent your career three times in your life. I sold my firm following the passing of our daughter Sophie six years ago and wasn’t sure what to do when the opportunity to do a PhD presented itself to me at the University of Technology, Sydney. They offered me a tax-free scholarship over three years. It took me a split second to accept. Immediately I thought of dad’s background & how hard he worked to create an opportunity like this for me. I did a PhD on an area that I reckon will be huge in 20 years from now – superannuation. I am now based in Melbourne as a Senior lecturer at Deakin University and oversee their financial planning and superannuation courses.
2) Adrian, you are the Author of the book 101 ways to save money on your tax. Legally!, which is currently in it’s 4th Edition. This is, without a doubt one of the best books on tax saving strategies in Australia, can you tell us a little about the book and what sort of reader would extract the most value from this book.
“I can guarantee readers that they will cover the cost of the book” – Adrian Raftery
Many thanks for the kind words. I guess I wrote the book in mind for people of all ages – well those over 18 – to be able to use it as a resource for them in the various stages of their lives. Whether it is your first job and doing some study through to having a family and buying some investments (shares and rental properties) or setting up and running a business, right through to preparing for – and then ultimately going into – retirement. No matter how old you are or how much you earn, you can keep more of your money with vital tax deductions related to family, employment and education, investments, superannuation, small business, and much more. I can guarantee readers that they will cover the cost of the book – which can be tax deductible if you purchase for managing your tax affairs – with just one tip. And I give 101 of them!
3) You have over 20 years experience in providing financial advice and accounting services to businesses in Australia, what would be the biggest mistake you see individuals making when it comes to their financial affairs, from an accounting point of view and how can it be avoided?
“not maximising the amount of money that people can put into superannuation” – Adrian Raftery
I have seen so many mistakes over the years from basic financial literacy, not reconciling bank accounts nor claiming as much as people are legally entitled to. I think the biggest mistake is not maximising the amount of money that people can put into superannuation. There are some incredibly generous tax concessions associated with super, especially the 15 per cent concessional tax rate. There is approximately $1.9 trillion in super throughout Australia today but if people were smarter then I estimate that the figure should have been at least triple what it is. Did you know that the revenue forgone in superannuation tax concessions is the second biggest expense in the nation’s Federal Budget each year? Something like only 5 per cent of eligible taxpayers claimed their full entitlement of the super co-contribution over the years – it is ridiculous as it is free money (as the government provides an extra $500 for $1,000 put in as a non-concessional contribution), although not as generous as previous years (when the government would match $1,500 for $1,000 put in).
4) You operate the website www.mrtaxman.com.au can you tell us a little about the site and how readers can use it.
One of my old clients used to call me Mr Taxman each year when he would come by and do his tax. So one day I decided to register the name rather than someone else having it. I also own the 1300 TAXMAN and 1800 TAXMAN phone numbers. As I am not actively looking to take on any clients, I thought I would create it as a resource base for some interesting articles and people can submit questions that they might have from time to time. If you like I am providing a free service to the public. I might go back and prepare tax returns again one day for a living. Never say never although having done a PhD in Superannuation I have ‘landbanked’ the Dr Super moniker. Stay tuned!
5) Thinking directly about residential property investments, what would you consider the top three deductions (by value) that are often over looked by Australian investors?
“Depreciation, the number one omission by Australian property investors.” – Adrian Raftery
Depreciation on assets and, in particular, the 2.5% capital allowance on buildings built after 1985 is the number one omission by Australian property investors. Make sure that you get a depreciation schedule from a quantity surveyor if you do try & claim this one. Investors generally overlook the costs of borrowing (such as mortgage stamp duty, loan application fees) which they can claim over five years. If I was to pick a third one I would say that whilst it usually varies from investor to investor, it would have to be the one expense that their agent doesn’t pay on their behalf & hence is automatically excluded from the annual summary – usually insurance but sometimes the council or water rates or body corporate/strata fees. It is also actually surprising how many forget about their biggest expense – interest on their loan – when they first draft up their return but they usually fix that up once they realise their error. Probably the biggest mistake of all is not claiming the buying (stamp duty, legal) and selling (legal, agent’s commission) costs when calculating capital gains when they ultimately dispose of the property.
6) If our readers would like to connect or follow your movements, what is the best way for them to reach out?
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Twitter – @mistertaxman
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