Kerry Packer’s former accountant reveals tax secrets

Kerry Packer’s comments on tax — anyone not minimising it needs their head read — are legendary. One of his top accountants has now penned a book sharing his tax secrets.

It was a salary perk that only Kerry Packer would provide – instead of cash, he awarded one of his most trusted accountants a complete rebuild of an E-Type Jaguar.

“A lot of us who worked for Kerry had a car fetish so this was great,” Allan Mason, a former key accountant at Packer’s Consolidated Press Holdings, recalls.

“This was also back in the days before fringe benefits tax so it was very tax effective for Kerry as well.”

Mason worked for the late media mogul for more than a decade in the 1980s and 1990s, overseeing a number of business divisions within CPH and making sure the company only paid only what it legally owed.

Kerry Packer at his famous 1991 parliamentary committee appearance.

After all, Packer’s view of tax – expressed sharply during his appearance before a 1991 parliamentary committee – has become the stuff of legend.

“If anybody in this country doesn’t minimise their tax they want their head read,” the nation’s then-richest man declared.

“As a government I can tell you you’re not spending it that well that we should be paying extra.”

The comments from Packer – where he stressed he was not evading tax in “any way shape or form” but like everyone else was certainly minimising it – elicited laughter from the public gallery and cheers in living rooms across the nation.

Mason has now written a book, Tax Secrets of the Rich by Kerry Packer’s Former Accountant, which focuses on how to keep your money after you’ve made it.

“He (Kerry) never accepted the status quo,” Mason says.

“An entrepreneur will always want to see what the situation is and see how it can be fixed. Kerry had a very good gut feeling. He made tough decisions but he could take in the bigger picture and back things he believed in.

“We were losing a lot of money with World Series Cricket. We were losing money with 60 minutes – it was losing millions of dollars, George Negus flying all over the world – but Kerry was supportive. As accountants we were telling him this thing is not looking good. But he always said, it is going to work, stick with it, how can we make it better?”

Allan Mason, author of Tax Secrets of the Rich by Kerry Packer’s former accountant. Pic Jamie Hanson.

Mason, who these days operates his own practice in Brisbane, like Packer says there is nothing wrong with legally minimising your tax.

That, says Mason, was not only Packer’s view but also that of former Chief Justice of the High Court Sir Garfield Barwick who made it clear that “the citizen is entitled to minimise his liability to pay tax”.

While Packer never wanted to pay a dollar more than he owed, he was flexible on amounts less than this.

Mason recalls once receiving a tax bill for close to $180,000.

“Kerry hit the roof,” he says.

“He said send them (tax office) a cheque for 78c, which was what the tax office claim ended in.”

The dispute ended up in court where CPH ultimately won.

“After we won the case the barrister for the tax office said what do you want to do about the 78c and Kerry piped up – you keep it, you need the money more than I do.”

Mason says two of the biggest myths around tax are the more money you make the more you need to pay and paying a lot of tax means you must be making a lot of money.

“There are many ways you can use the system,” he says.

Lloyd Williams and Kerry Packer at Crown Casino.

“Don’t think that you will never pay tax, but it pays to look carefully and it pays to step back and think is there a better way.”

Looking for a better way was drummed into Mason by Packer when he was hired.

“Kerry said, ‘son you need to be worth double than what I’m paying you’,” he recalls.

“I’m standing there thinking but I’m an accountant. But accountants need to be proactive, not reactive. They need to know you and your business, they need to be a member of your team. If you are not getting the right advice, change.

“Working for Kerry, after six months you either didn’t have a job or had a big rise. You were out or you got a big rise. He expected a lot, but he paid well – well above market rates. They were fun times. It was an exciting place to be.”

Packer received weekly reports, faxed in, from each division tracking key revenue, profit and loss measures.

“If something was tracking down that might involve a fairly heavy phone call from Kerry to say what is going on? We need to lift its game? What do we need to do to make it better?” he says.

“Small business don’t always track what they are doing but they should and today they can do that quite easily. Your bank transactions can feed directly into your QuickBooks or Xero and you can look at it in any point in time and know where you are tracking.”

Kerry Packer with son James playing polo.

Mason’s other key message is for small business to plan ahead.

This, he says, will become critical as the federal government looks to repay a historic debt pile.

“After the election – I shouldn’t be sceptical – but over the next year or two expect to see some sort of budget repair levy as well as a tightening up in expenses and a more aggressive attitude by tax authorities about what can be claimed,” he predicts.

While Covid has thrown up huge challenges for small business, Mason points out the bulk are doing very well.

He estimates around 80 per cent of his clients are doing as well if not better than pre-Covid.

But for the pockets of real stress – hospitality, tourism, businesses with exposure to international students – he urges them to be realistic and, critically, not to take failure personally.

“Don’t keep your head in the sand during difficult times,” he says.

“If you can’t get your business into a break even position you are going to lose everything. You may be able to restart in a different entity but you need to take hard decisions.

“There is bad luck in business. Business owners should not take it personally. You can be a very good operator and things can go wrong that are totally out of your control. Covid isn’t personal, but you need to take a business decision and my time with Kerry showed me just that. We had to close businesses and sack people. Those things were tough. But it was a business decision, not personal.”

TAX TIPS FROM KERRY PACKER'S FORMER ACCOUNTANT

• You only pay tax on realised gains, not unrealised. So you have a chance to defer the taxing point.

• Expenses incurred in earning income is deductible.

• There are many tax exemptions that can apply. These include prepayment rules, CGT discounts, roll over benefits. Sole and principal residence etc.

 

For workers, we all know that being taxed at the source can be a problem. You need to think ahead.

 

1. You home is completely tax free – I know many people that build wealth by buying renovating and selling, over and over again.

 

2. Rental property allows the build up of assets and only 50 per of any gain is taxable. In addition interest, depreciation and other costs will be deductible. Any losses can be offset against your salary income. It is not uncommon for those that take this path to accumulate five to 10 properties over a period. But don’t forget you can prepay you interest up to 12 months if in one year you have a capital gain to declare on say another property.

 

3. Same as above with share portfolios or other investments.

 

4. Work expenses – do not underestimate or lose receipts for expenses you incur when employed.

 

5. Keep your receipts and ensure you claim any donations made, purchases of tools of trade, work boots or protective clothing, cleaning of a work uniform.

 

6. Make sure you claim any union fees or professional subscriptions.

 

7. Work from home expenses. The tax office allows a shortcut claim method at 80c per hour when you are required or forced to work from home. However, if your costs are higher than that, with proof, you can claim the higher amount. Do not include fixed costs such as your home mortgage as this can affect the sole and principal place of residence exemptions. If you rent, then the portion of the house used for business or work can be claimed on a percentage basis.

 

8. Self education expenses can be claimed, provided the study is directly related to either maintaining or improving current occupational skills or is likely to increase income from your current employment.

 

9. If you use your motor vehicle for work-related travel, there are two choices of how you can claim. If the annual travel claim does not exceed 5000km, you can claim a deduction for your vehicle expenses on a cents-per-kilometre basis. This figure includes all your vehicle running expenses, including depreciation. The allowable rate for such claims changes annually. We encourage clients to use a log book to calculate the business portion and claim this if it is higher.

 

10. If you earn income from AirBnB, Airtasker, Uber etc. make sure you declare that income. But also make sure you keep records of all expenses you incur earning that income.

For small business owners in most cases, every expense you incur in running a business will be deductible. These expenses include:

 

11. Motor vehicle costs – keep a log book to justify the business use portion.

 

12. Office costs such as rent, stationery computers.

 

13. Travel to see clients or prospective clients. This even includes research and training classes attended, overnight accommodation, meal costs.

 

14. The government has been very liberal in allowing 100 per cent write-offs of the cost of purchasing plant and equipment and motor vehicles used in your business. There is a limit of $150,000 and time constraints apply. If you need to replace your work ute for example, it would pay to purchase a new vehicle even if under a chattel mortgage (not lease) as the full cost will be deductible.

 

15. Superannuation is deductible up to the limit of $27,500 for each employee (for the 2022 tax year), director or others working in the business. If you run your own business make sure you use this concession as the money is basically transferred to help your future retirement and you get a tax deduction for doing so.

 

16. Write off all bad debts and obsolete stock. Stock at 30th June can be valued at the lower of cost, net realisable value or market value.

 

17. Prepayment of expenses for up to 12 months in advance, like rent, interest etc.

 

18. If you are in business we recommend that you transfer your work and even private vehicles (in some cases) to your business. Private vehicles may give rise to fringe benefits tax but if you are clever this can be minimised with a simple journal entry in the books. With business vehicles you should keep a log book to establish the business portion. The private portion is then charged back or becomes a fringe benefit as above. Vehicles designed to carry goods have some different rules.

Don’t forget superannuation.

It needs to be stressed that the implications are different for each situation. Money paid into your superannuation account falls into two categories.

 

19. Concessional meaning you receive a tax deduction and can contribute up to $27,500.

 

20. Non concessional meaning you do not get a tax deduction $110,000 limit.

Why is it such a great benefit?

Quite simply it is like transferring money from your trading account to an online saver and getting a tax deduction for doing so (up to the limits above).

Depending on age and whether your fund is in pension mode or in accumulation mode the super fund, not you personally, will pay tax on income earned.

This will be charged to your super fund account. Hence you do not personally need to pay this.

If in accumulation mode the fund pays 15 per cent tax. But you get a 100 per tax deduction which could be worth 45 per cent in refunds.

But if your fund is in pension mode you do not get a tax deduction but the income earned by the fund is tax free. So it pays in this situation to push your money into a tax free environment rather than pay tax yourself.

The above is very general and does not take account of a number of complexities that exist. My point is do not discard the benefits of using super. Get advice to see if you can use this to save tax.

 

Allan Mason worked as an accountant at Consolidated Press Holdings for more than a decade and is author of Tax Secrets of the Rich by Kerry Packer’s former accountant