Adam Sullivan's Hard Lessons

Jason · 00:00Welcome to Episode 230 of The Numbers Game. I'm Jase. I'm here with Nick and Marty. And Marty, I'm getting pretty excited for Raising the Bat at 250. You know I love getting excited about numbers.

Nick · 00:09What are we at?

Jason · 00:11230. It's all happening.

Nick · 00:13Geez, that's gone quick, actually.

Jason · 00:15Yeah, it's been a lot of fun. It's been a lot of fun. And you know, when you make podcasts and you put out content to the world, you actually— well, I find myself online looking at other people's podcasts and then you get sucked into YouTube videos and brings me straight to the point today that I watched a YouTube video about a man man called Adam Sullivan.

Jason · 00:33He's the founder of Evidence-Based Training, and some people might know him as CUNNY or Top C. For those that are joining us today, Marty, Nick, any idea who Adam Sullivan is before I dive in?

Nick · 00:45Not for me, mate. I have no idea who this Adam Sullivan is. I used to watch the Sullivans in the '70s, but is he any acquaintance?

Jason · 00:57I don't think so, mate. I don't think so. So Well, the, the podcast or the YouTube that I watched is by Frankie Lee. I think it's a podcast as well. And this particular episode was called Zero to $1.5 Million a Month with Adam Sullivan. So just for a bit of background, he is an entrepreneur who founded a business called Evidence Based Training.

Jason · 01:17It's online training, personal fitness, meal plans, you know, and he grew to fame with his kind of no bullshit attitude on camera. You know, there'd be fitness influencers that would tell you what to do and he'd kind of debunk their myths and just say, you know, don't worry about listening to this bullshit.

Jason · 01:34Like, this is what you got to do. And he throws the word cunnies out there and led to probably one of the coolest things he did was a collaboration with Frontrunner, which is another— which is a clothing brand. And he had the cunnies collaboration, which is a whole bunch of t-shirts that say cunnies or EBT. And yeah, I mean, look, to be honest, it just seems like he's exploded across social media and has done an incredible job.

Jason · 01:57I mean, any business that can go from 0 to 1.5 million a month, you've got to be pretty, pretty happy with those numbers.

Nick · 02:04Numbers. That's impressive. But knowing you, uh, Jase, why have you brought him to the table? You debunking him in some way? What, what, what's happening here?

Jason · 02:13You know what, the angle that we're going here is the love of numbers. And on this particular YouTube episode, Adam was quite open. I think that's one thing he did really, really well, was to share his journey of where he started, what fueled him, and where he got to where he is today.

Jason · 02:29But also, with the rawness and, and the realness to him, he actually kind shares a little bit about his numbers that I thought as an accountant was really interesting to see that luckily he's going to come out the other side of it, hopefully. Okay. And there's a bit more to the story that you're probably going to think he's doing really okay.

Jason · 02:44But yeah, so basically one of the first things he goes into is the trap around money. So when you got lots of money and it comes into your company, it's often a mistake that people make is that this assumption that the company's money is your money.

Jason · 03:00Now, when you make that mistake, you kind of get yourself into some pretty big tax hurdles. So I don't know if it's something you guys come across with people that you work with or business owners that sometimes make that mistake, that the money that's in the company's bank account, you know, they've earned it. It's their company. They're the director or the shareholder.

Jason · 03:15So they're entitled to spend it how they will. You ever seen that happen?

Nick · 03:19Oh, just check out the tax debt, the company tax debt, and how many people are taking out loans to you know, to try and mitigate their tax debt because again, one thing, making money, but you got to know how to disperse and where to disperse. But seeing that as a, as a problem throughout 25 years, really.

Jason · 03:38Well, the, the numbers that Adam shares, I'll probably give you a little bit of the background as well. He became quite big in the media for his house purchase at the end of 2024. So back in October '24, he purchased an $11 million property from Rob Greyer or Greyer Constructions, I think it was, and it was called June.

Jason · 03:58Dune, D-U-N-E. And this particular property on the Gold Coast, I think it smashed all records for, you know, the sale price of a mansion on the Gold Coast. So, you know, when you start to make the media and again, great publicity, it's kind of like a bit like the Adrian Portelli style, you know, which was quite a big episode of ours that had a lot of hits.

Jason · 04:17So if you haven't listened to the Adrian Portelli episode, if you want to go back through the archives and figure out what I'm talking about. But he bought this property for $11 million, and this is kind of where some of the problems start to snowball as to where that money came from and how he was able to put a deposit down on that. Now, in the episode, he talks about understanding what a Div 7A loan is.

Jason · 04:36Now, for those playing at home, simple explanation of Div 7A: it's basically a tax rule that stops business owners taking money out of their company tax-free. So you can imagine you might have done $1 million in sales, to make the numbers easy. You haven't paid tax, company tax, on that money yet, and you rip that money out of the company and you've got that money in your personal bank account.

Jason · 04:57Even if you then pay company tax on it, but the money's no longer in the company, you're using that personally. The ATO doesn't like that. So this Div 7A rule or Division 7A is around stopping business owners from getting a benefit of money that should be sitting in the company bank account.

Jason · 05:12Now, in Adam's case, that dollar figure ended up being close to a $6 million loan that he'd pulled from his business to himself. Now, does anyone want to hazard a guess at how much interest it would take to pay back that under a formal Div 7A loan agreement, which I'll explain shortly?

Marty · 05:33As in, what interest does that attract?

Jason · 05:36Great question. So this, this is why I ask you guys these questions to figure out how much my accounting nerd speak will actually get people confused. So a Div 7A loan, if you take the money out of your company and your accountant and you get together and go, we need to formally turn this into a loan so that you don't have to pay tax on that in one big lump sum.

Jason · 05:56So to backtrack, if Adam had pulled that $6 million out and didn't turn it into a Div 7A loan, the accountant would have to declare that $6 million into Adam's name. Whether it's an unfranked dividend, the payment goes into Adam's personal tax return, and in one year he would have to pay tax on $6 million.

Jason · 06:14Now at 45%, you imagine that's close to a $3 million tax bill on the $6 million he's pulled. But if he's put that into his property to buy the $11 million home, he doesn't have the cash. So clever, clever accountants and good advisors will work with clients that even when they do draw some money out of their company, they have the option, as long as they do it in time, in a timely fashion, to convert what they've drawn out as a formal Division 7A loan.

Jason · 06:42Now, under this Division 7A loan, you have 7 years to repay the company with interest. Following so far, Marty?

Nick · 06:51Yeah, I'm just thinking, what's the rate?

Marty · 06:53Yeah, come on, mate. Get to the crunch. Come on.

Jason · 06:55Get to the crunch. 8.77% is the ATO's benchmark interest rate. So, you know, not wildly off what the interest rates you might be getting from a bank. But I guess when you are borrowing that amount of money and you've only got 7 years to repay it, there's a lot of money you've got to repay in a short period of time.

Jason · 07:12So if Adam was able to formally put that loan on a Div 7A agreement, he would have to pay his own company $2.1 million interest and repay $8.1 million back to his own company over 7 years.

Marty · 07:27That interest component has to be— does it just capitalise? Yep. Every year that the money doesn't come back, does it? Does the 7A loan just go up?

Jason · 07:36Yeah. So no, the Div 7A loan doesn't go up. You formally have to either make the repayment or declare that as income into your personal return. So what you'd be hoping for is that your own— your company is generating enough profits to have taxes paid. You'd then have franking credits.

Jason · 07:52And in the example of the first year of the $6 million loan for Adam, he would need to make a one— just under a $1.4 million repayment, which would be just over half a million dollars in interest and $857,000 in principal.

Marty · 08:06And if he doesn't make that, then that 1 year of the 7 years hypothetically is classed as income.

Jason · 08:12No, you basically default the entire loan process and the whole amount gets pushed out as taxable income into Adam's name without the benefit of franking credits and time of multiple years to be able to repay that loan back or to spread that out over multiple years.

Marty · 08:29So it's just— And then he gets hit with like a $3 million tax bill.

Jason · 08:33Correct. Correct. Exactly. So it's huge. And then on top of that, I mean, even if you do manage to meet the loan repayments, have enough profitability to pay frank dividends and service a Div 7A loan. Now, there's a lot of business owners out there that are probably hearing this going, geez, I feel like my accountant's tried to have this conversation with me before and I've never really understood it.

Jason · 08:52The other side of it is that, you know, you might think, oh, well, I'd rather pay, I'd rather pay that money back to my own company and have the interest in my own company. But that again, there's all these tax consequences of personal taxable income for Adam. He's going to pay more tax in his own name. Then when he pays that $2.1 million of additional interest in his own company because he's just— it's basically topping up the income of his company.

Nick · 09:14So classed as revenue.

Jason · 09:16Correct. So that $2.1 million in additional revenue in his own company, which is interest he's had to charge to himself, becomes taxable income, which would give him an additional $525,000 in tax payable over 7 years.

Nick · 09:31So you're in a terrible cycle there, aren't you?

Jason · 09:34Yeah. And, and while these numbers are huge and shows the bigger impact of, you know, what a large loan does, even for small business owners, this can be $100,000, $50,000, $200,000 or what ends up becoming a problem is when business owners take money out over multiple years without being able to repay.

Jason · 09:53So you might end up with a couple of DIV7A loans on the go spread across multiple financial years. So the lesson in this one, and it flows on to a few other things that he learned, but the So the lesson in this one is to make sure you're working closely with your advisor before you rip money out of your company and to totally understand the tax effect of what making some of these moves with money does when you are a director of a company and you do have a company bank account full of money.

Marty · 10:19So I was going to say the underlying thing, if you're going to give any message to anyone, because some people might not have that close relationship with their advisor or accountant, whatever it might be. But the underlying rule is when you take money out of your business account for yourself personally, it has to be— there's a tax that needs to be paid and it needs to be paid in that financial year.

Marty · 10:44Yep. If people remember that, because I feel like people don't really grasp that. But if you understand that, then you will go to your advisor and understand it. But you cannot take money from your business account to your personal account. Without a tax consequence. And as simple as it sounds, I don't think many people understand that, or a lot of people don't.

Nick · 11:04No, they see the money there and it's theirs and they just spend it. But just a quick question. Is there any time you should be considering taking out a DIV7 loan? Like, just from what you said, I think it's almost ludicrous that someone would do that. But is there any situation which that's a good idea at all?

Jason · 11:23Look, I mean, I've definitely seen them used well as well from a person, like from a cash flow point, whether it's getting a property into a personal name but using the company's funds for a couple of years to be able to get the surplus cash flow. It all comes down to documentation, paperwork, and then forecasting the flow of money.

Jason · 11:40If you've got a company that's loaded up in cash, let's say you did have a couple, couple of mil in the bank, you've got a choice to go to a bank or go to a broker and go to a bank and ask for some money. Maybe it's already like 5, 6, 7%, or you've got your company's bank full of money and you can do a formal loan agreement from your own company and use those funds as long as you're repaying interest and, and whatnot.

Jason · 12:05So if you've got the money, it can form part of a really great strategy. But again, it usually forms part of a bigger, a bigger structure of having, you know, one of the other episodes we've talked about is bucket companies. Rather than leaving that surplus cash in a trading entity where there might be some risk.

Jason · 12:21It's about getting it out through the family trust and then putting it into a bucket company and then letting that bucket company generate the interest income and pay tax on the interest income while the family is getting the benefit of using that money, you know, to buy a property or to invest outside of the bucket company.

Jason · 12:37So good question. I have seen it used well, but it's usually— and this comes down to like really good cash flow positive companies that are making good money. Where I've seen it go wrong is businesses that have stripped money out in one year and like what Nick said, they haven't been kind of aware of the tax consequences and they go, well, hey, I'm not going to repay that this year and I don't want to have the income declared to me this year.

Jason · 13:01I'm going to kick the tax can down the road, but without understanding the full formalities of a 7-year formal Div 7A loan and what that means from an interest repayment point of view. Just for an asterisk for those playing at home, if they do look into this, there is the option to do a 25-year secured DIV7A loan as well.

Jason · 13:19So let's say you were using that money to buy a property and there was— you're able to put a mortgage over the property. You can actually extend that DIV7A. Basically, you can actually borrow your own company's money for 25 years secured. I know.

Marty · 13:35It's just going back to our complicated tax system. Like, seriously. Oh, like, seriously, if you take money out, you should just pay tax. It's pretty simple. Like, well, yeah.

Jason · 13:47And look, and this, and this probably comes back to, you know, people who are wage earners putting money into super and going about their lives wondering how some of these people get ahead or these different schemes happen. You know, you probably sit back and go, well, this sounds like shit. This sounds bullshit. Like, as a wage earner who works hard and contributes and invests, I don't get to borrow a shitload of money and, you know, pay my own company back.

Jason · 14:09So, you know, the tax system is complicated and it's full of these scenarios. But now this is why things like Div 7A exist, to try and not let business owners get an unfair advantage without paying tax. So that was one of the big ones. Really interesting.

Jason · 14:25It's really early on in the episode to kind of COVID it in the first 15 to 20 minutes on that YouTube app that I was talking about. The next interesting one, which is always fun, I mean, And I'll use Adam's example, but you can, you can apply this to any one of your mates that you know or people that you know who run a company.

Jason · 14:40If they've got the company car, they might have bought a boat, they've got business, they've got assets they've bought in their business, or they've pulled money out of their business to buy the fancy, fancy car. So in Adam's scenario, he withdrew $850,000 from his company to buy a Lamborghini.

Jason · 14:59Now, what he unpacked really well in the episode that he didn't kind of get until after the fact, which is part of his lessons learned, which happens to a lot of business owners, is it's one thing to draw the money out and pay for it, but if you're going to own that personally, you need to take into consideration the amount of personal taxes you need to pay to end up with that net $850K of income.

Jason · 15:20So an $850,000 Lamborghini actually cost, cost Adam $1.4 million after he'd paid his personal income tax bill because his accountant had to declare that income as his because he'd spent the money and it was just getting too out of control to have all these Div 7A loans and different things.

Nick · 15:39I feel sick.

Jason · 15:40Yeah, that is—

Nick · 15:42Poor Adam, he's out there making a buck and he's just gone a bit rich on a few of the purchases. Goodness me.

Jason · 15:48Yeah. And this is where we can see it all go. And I've seen this happen to small business owners that start a business and it goes really well, really quick, and they've got cash. But before they've met with their accountant, covered the first year's taxes, paid a few of the big basses that hit their way, they get, they get trigger happy on the spending because it's the first time in their lives they might have had a bank account full of cash.

Jason · 16:07Now you can imagine for a young man like Adam having $1.5 million a month drop in going, I can't even spend it. He actually talks about not being able to spend the money as fast as what it was coming in. But then all of a sudden, when you start to take into consideration that the money that's coming in wasn't all his, and that's what he had to kind of unpack and learn.

Nick · 16:26And then he would have been paying tax in advance the next year on all these earnings that he earned. So it would have been just this cycle of drowning in tax.

Jason · 16:34Definitely pulled back on the flashy purchases to, you know, he talks about doing it for the gram, you know, which is as a social media influencer who wins clients that way, you can see how and it would have a benefit. But he learned, he learned the hard way pretty quick. But where we see clients also get this wrong, and I wanted to give you the example of fringe benefits tax.

Jason · 16:53Now, in Australia, the fringe benefits tax year ends on the 31st of March. So keep in mind, it's not the same as the financial year where we usually have a 30 June year-end for our income tax year. FBT ends 31 March. So if Adam had actually left bought, basically transferred the $850,000 straight to the dealer and registered the Lamborghini in his company's name, he would pay a tax of what's called fringe benefits tax.

Jason · 17:19We've probably all heard it, but not really, again, understand it. And ultimately fringe benefits tax is when you are providing a benefit to an employee. So Adam, the employee who gets a fancy Lamborghini, the company must pay a tax to level the playing field.

Jason · 17:35And that tax rate is actually 47%. To the value of the fringe benefit. There's a method called statutory method. I won't bore you, but it's 20% of the value. So Adam's $850,000 Lamborghini, he would pay fringe benefits tax calculated at $170,000 because that's 20% of the value of the Lambo.

Jason · 17:54It's grossed up because they times it by 2 to say— so let's say that that becomes $353,000. The actual rate is 2.08%. Now what that's doing is that's saying $353,000 is the amount of after-tax dollars Adam would have to pay to be able to have that benefit of that Lamborghini per year.

Jason · 18:14It's then taxed at 47%. So every year Adam, if he bought it to the company, every year that Lamborghini sits in the company, he has to pay an additional $166,208 in tax.

Nick · 18:28It's incredible. So I'm stunned almost, like, you know, testament to Adam talking about this too, because again, it's an extreme situation, but so many people when they come into new money in a business make these fundamental errors because they haven't got the professional advice upfront.

Nick · 18:47It's like Nick said, you know, if money's coming out, it needs to be, you know, tax paid on it, basic method. But when it's scaling so rapidly, you think, yeah, no worries, it'll be right. I'll do another 1.5 to 2 next month and it'll all sort itself out.

Nick · 19:03But it shows you what a handbrake it becomes and problem. But yeah, testament to him for talking about it because it's not something people would usually chat about. So it's good to unpack it, Jason. You're giving us some great fundamentals around it actually.

Jason · 19:17I couldn't agree more. I think it's a great thing. He talks about he got the right advice and now he's set up the right entities and he stopped treating his company like a personal bank account. And I think anyone, any young person who's followed Adam's journey and he talks about, you know, how he took it upon himself to get better, invest in himself, learn.

Jason · 19:32I think the ability to talk about these financial lessons and mistakes will make better business owners out there who have listened to that, which again is the reason why we share, because we think it's important to share this education and share the learnings. If Adam didn't have a new bunch of advisors that he was getting info from, we would obviously be happy to take Adam on board and look after him.

Jason · 19:53I did want to not end on— well, you probably will end on— I wanted to talk about the numbers around his house. You guys, as mortgage brokers, I think you'd get some kicks out of this one. So when he bought the $12 million home— sorry, $11 million home— the update to the news is that he actually sold it for $12 million earlier in 2025.

Jason · 20:20So around must have been about March. What basically happened was I think Adam started to see the loan repayments come out early on and it worked out that his loan repayments were about $55,000 a month or about $660,000 a year.

Jason · 20:38Now, again, if we've just had this conversation around how to get— work out your after-tax money, that meant that just in funds out of his company, Adam would have needed to be declaring at least a $1.2 million personal income into his own name, basically giving 45% of that to the ATO just to have enough money left over to meet his loan repayments.

Jason · 21:00On the $8 million loan, it was looking like if he'd serviced that over 30 years, he would have been paying back close to $19 million after 30 years for his home and about 10, 11 mil— just over $11 point something million in interest.

Jason · 21:15So I think the dust settled on the beautiful new property. He had the best mansion in Gold Coast. You know, it was $11 million, $8 million loan.

Nick · 21:23Own.

Jason · 21:24But by the time you start to do the numbers and actually unpack after the emotional and excitement of buying that house, Adam came to realise that it was not a property that made sense for him for the long term. But in a way, this is a guy that, you know, while he's learnt some lessons the hard way, sometimes things actually work out.

Jason · 21:42He managed to get $12 million for his $11 million home. It's his main residence, which we all know that that means tax-free million-dollar gain after 5 or 6 months in the property. And the story is that he's gone on to reinvest $3 million of that into a property that's probably more appropriate for him and where he's at at the moment.

Jason · 22:02And yeah, guys, thoughts on seeing that before? Somebody gets into a property and all of a sudden the interest rates and repayments, or I'm assuming probably not.

Nick · 22:13Oh, well, yeah.

Marty · 22:15We see the big repayments, but generally not like that and people being forced to sell them. I'm not sure. Surely he knew the repayments the day that he signed his loan contracts. But anyway, or maybe Marty, when he got his pre-approval, the banker took him through his repayments.

Marty · 22:34But I'm just thinking about some previous episodes and conversations we've had around the ability to, or the, the ease of opening a business and no education required. And then you see people get into these, um, these predicaments.

Marty · 22:52And particularly now with social media, um, and how easy it is, you know, pages like OnlyFans where young people are making a stack of cash, um, and don't have any business acumen. And that's not to that's not putting them down.

Marty · 23:09They just haven't, they just haven't had the education or they haven't been in, in, in business. So on a lower level, how many of these situations would be, would be out there, you know? And I'm picking on OnlyFans because it is easy to make money and make money quick.

Marty · 23:27So you can imagine all this money piling into a bank account and people just spending it without understanding the ramifications. So You know, I just think back to our early episodes, as I said, and think, well, should there be some minimum education requirement to number one, open and then trade under an ABN?

Marty · 23:45Or, you know, is there a government-approved list of advisers that you need to go through to get the ABN established to get around these things? Like, how do you have someone that had enough money to buy an $11 million house but had no idea about this stuff?

Marty · 24:01It's just crazy when you think about it. So yeah, I just think I think that would be a good idea. Either you go by an advisor to open your ABN and it's an approved list, or there's some basic level of education before you go and register that ABN.

Jason · 24:16No, I couldn't agree more. You know, OnlyFans is a great example. But and even beyond that, it's just, as you said, the ability to start an ABN. I think about clients or potential clients that called us to get an ABN. And the circumstances that they were working in actually didn't qualify them for an ABN because basically it was like scam contracting or sham, sham, scam, sham, sham contracting that, you know, they were getting put into circumstances where it actually wasn't a business they were running.

Jason · 24:46They were going to be screwed out of WorkCover and superannuation and certain things. And, and then all of a sudden we get a call back because we've said, no, we can't, you don't qualify for an ABN, you can't have that. You know, you're not running a business. And then we've had callbacks or emails back saying, oh well, I did it myself.

Jason · 25:01I actually found the online portal and I filled it out myself and now I've got an ABN. But it's like what happens is they answer the questions wrong to game it to get the ABN saying that they are running a business rather than contracting. So yeah, couldn't agree more. You know, this, this story around Adam is just, you know, using as an example of how there's certain things that as a business owner you need to understand from an after-tax point of view, Division 7A, FBT, the whole, the whole works.

Jason · 25:27And that's we haven't even scratched the surface, which is again the importance of having a good advisor, doing your own research and education. The reasons why The Numbers Game exists to give that extra value and extra education for people. But I hope that one day we get to a point where there is some kind of barrier or course that is required.

Jason · 25:47It doesn't have to be overly complicated, but it needs to cover the basics of what it means to be a business owner, what it means to be a company director, what it means to be a shareholder, all the different things that you're basically signing paperwork for.

Nick · 25:59But yeah, I think, I just think it's, you know, it's never a problem until financial illiteracy smacks you right in the face. And Adam's, he's copped two punches straight to the head. The good thing about the fact of his capabilities of earning that type of money and having a great business, you know, upfront is he can readjust and take on the lessons which will make him ultimately a stronger business owner.

Nick · 26:23And But if there was ever something you brought to the table, Jase, that just highlighted the need for professional guidance and mentorship while you're growing a business and it's accelerating, this is it.

Nick · 26:40And it would happen on smaller scale all around the joint as well. But again, what a sacrifice in a horrible way. But he will, like I said, the fact he can run a good business, he's fortunate enough. No doubt he'll be able recover from it, get it right, and be stronger once you set the new foundations up.

Nick · 26:59But if people can get that advice upfront, save them a lot of pain points.

Jason · 27:04Yeah, 100%. Well, if you've liked this episode, please like it, rate it, share it, tell your friends. Adam, this has got back to you. Appreciate what you're doing, mate. Keep up the great work and sharing the vulnerability that you've turned into strength. Glad you've got some good advisors around you. If you're a company owner or director and you do have a DIV 7A loan and you've got no idea what that means and your accountant can't explain it to you, feel free to reach out.

Jason · 27:27Happy to unpack it with you and get you on the right track.

Nick · 27:30Until next time though, the cost of advice is very cheap compared to the cost of things going very, very wrong. Get advice. Game over.

Jason · 27:41This podcast is for educational and informational purposes only. The conversations are of a general nature and do not qualify as financial or tax advice. We recommend before you make any financial decisions, you consult a licensed professional International. Individuals on the podcast may hold positions in the companies discussed.