Leon Bennetts

I sell really nice heaters on the internet. Stumbled into buying an old-school brand. Rebuilt everything and scaled. Boring business = stupid hard and I love it

[Leon Bennetts @LeonBennetts]

Mine is terrible. I thought people were exaggerating and now regret updating. Had to disengage 4 times on a 15 min drive home today. Similar issues to this guy. It tried to veer off onto a tollway ramp 3 minutes from home and jolted back and forth with indecision. My wife refuses to use it now because it’s so erratic.

[Leon Bennetts @LeonBennetts]

@wrightg @GDickins My wife is no refusing to use FSD because the update scares the shit out of her and I don’t blame her. Super erratic.

[Leon Bennetts @LeonBennetts]

Man mine is terrible since going to V14

Changed lanes 5 times on a nearly empty road for no reason on Chill, tried to go on a tollway when we were 1km from home and got freaked out.

Had it set to go into our drive and it just got to the intersection just before our house and stopped and went into park.

[Leon Bennetts @LeonBennetts]

@geolateral @LukeyTrags @TwinTurboCe1ica They had 3 companies on their loan book collapse with large debts.

Question is if this is just the beginning. There’s a lot of small businesses struggling right now.

[Leon Bennetts @LeonBennetts]

For a lot of SME’s, Judo is the only one that will lend to them at reasonable rates with quick turnaround time. Especially unsecured debt. They’re very good to deal with and quite tolerant of business risk at this level. Where they might come unstuck is if these business collapses are the canary in the coal mine for their loan book.

[Leon Bennetts @LeonBennetts]

Yeah but this situation hasn’t changed from the old rules.

The company can still claim the active asset reduction on the asset sale, but could never claim the old 50% flat individual CGT discount.

The issue is that the funds from the sale are still in the company and still need to be distributed to shareholders… so your only option is to keep them in the old company and spread out the payments to you as an individual.

Which is definitely a gap - but nothing in the budget made this scenario worse.

[Leon Bennetts @LeonBennetts]

@BhagsNStonks @taipan168 Also I’m pretty sure the $6m asset test will be retained. So if you’re over $10m but low margin and your active assets are less than $6m - you still qualify.

[Leon Bennetts @LeonBennetts]

I meant the initial budget policy was fucked.

This is a lot better.

If you’ve got an existing business the base 50% discount will still be applicable for value accrued or time held until July next year, even if you sell after that.

So to actually pay 47% over $10m you’d need to start after July 1 next year, have zero cost base and not meet the classification of a start-up.

There will be some businesses where that’s the case, but it’s not a huge pool.

[Leon Bennetts @LeonBennetts]

@BhagsNStonks @taipan168 23.5% is pretty comparable to the rest of the world.

Honestly this is now reasonable policy where before it was clearly fucked.

Hopefully they also fix the effects of the 30% CGT floor on lower income earners. They get that done I have relatively few complaints.

[Leon Bennetts @LeonBennetts]

Arabica is superior, but I have to hand it to the Vietnamese for finding a way to make Robusta delicious. Great Viet coffee is spectacular.

I got to try Liberica beans in the Philippines recently and they were really interesting, I’d love to see more specialty places seeing what they can do with them. My understanding is they’re hard to cultivate at scale, the trees are way bigger.

[Leon Bennetts @LeonBennetts]

@levelsio @DennisonBertram McCafé is Aus influence again. Concept was invented here because nobody would drink normal McDonalds coffee. It’s still average coffee but way better than what you’d expect from a fast food chain.

[Leon Bennetts @LeonBennetts]

@levelsio Australia’s coffee scene is next level. I’m in suburban Melbourne and there are 5 specialty coffee places within a 5 minute walk from my house. They would all be top tier cafes anywhere else in the world - here it’s just normal. And the breakfast game is elite.

[Leon Bennetts @LeonBennetts]

@levelsio Plus Indonesia grows some great coffee locally so there was an existing coffee culture to merge with.

[Leon Bennetts @LeonBennetts]

@DavrosyDavros @chrisbrycki Yes I know. The point is that for anyone earning at least $45K from their salary - the 30% floor doesn't make any difference.

The change to the CGT discount does still have an impact, of course.

[Leon Bennetts @LeonBennetts]

@_colourmeamused @skinthent @cfc_fancan They’re a similar distance away as the great beaches near Brisbane.

[Leon Bennetts @LeonBennetts]

@DoodyDarren @DavrosyDavros @chrisbrycki Yeah, they specifically did it to target high net worth retirees selling off assets the year after they retire. Fair enough to try and do something there.

But the way it’s been done is just super clumsy.

[Leon Bennetts @LeonBennetts]

@DavrosyDavros @chrisbrycki I don’t support the changes, but anything you earn above $45K is taxed at 30%. So this isn’t true.

It does mean that people under $45K are paying more tax on capital gains than income which is dumb.

[Leon Bennetts @LeonBennetts]

I don’t like the changes, but you have to satisfy either the turnover test or the <$6M net assets test.

So business owners with turnover well over $2M can still qualify if the your net assets are below $6M

This can get weird fast… e.g if you sell at $6M and qualify you end up making ~$800K more than if you sell at $7M and don’t.

That wasn’t the case with the 50% CGT discount was in place… at $7m you still ended up slightly better off.

The bigger issue is that moment you’re over that, the tax rate jumps to one of the highest rates on business sales in the world.

Ultimately that’s going to disincentivise talented entrepreneurs from coming here, and cause young Australian entrepreneurs to move overseas to build.

[Leon Bennetts @LeonBennetts]

This isn’t even some edge case hypothetical. It’s incredibly common.

I’m talking from my own direct experience running a business at this kind of scale.

Every founder I know in a similar business understands the struggle perfectly.

I’m not complaining about the challenge. That’s part of the deal.

Would I build this kind of business again under the proposed tax structure?

Probably not. The potential reward wouldn’t justify the years of insane personal risk, stress and sacrifice.

A lot of other entrepreneurs will feel the same way. Some will move offshore and do it somewhere they feel valued. Some will just get a job.

And that’s a shame. Because ultimately Australia loses out on the jobs, products and services we create.

[Leon Bennetts @LeonBennetts]

Yeah doesn’t always work like that in reality.

In a capital intensive business, (like physical products), even if you have strong profitability on paper… most of it gets consumed to buy inventory so you can keep growing.

On top of that, many small businesses go through a “valley of death” at around $3M annual revenue. Your reach your limits as a founder trying to manage everything, and need to recruit more expensive team to get to the next level. Profitability gets crunched to next to nothing until you get to the other side.

In the example of a $5m exit after 10 years, it’s entirely possible for the founder to have taken no salary or profits for years at the start.

Then taken an under market salary for a few more years until getting to the other side of the valley.

Finally they get to the other side of the valley and are profitable, they can maybe pay themselves $120K but still can’t take significant profits because of the inventory demand.

And each year they’ve taken increasing levels of risk and stress.

After 10 years they get an exit for $5M. And they get slammed by ~47% tax - which will be one of the highest rates in the developed world by some margin.