He divulges how the relationships he has with his clients and other people in his industry are of the utmost importance, next to those with his family, of course! He discusses his plans to leave a legacy for his children, the effect timing has on tax, and the property gurus he takes his inspiration from.

Timestamps:
01:42 | Refocusing Wealth
05:13 | Putting Clients First
06:27 | A Family Man
08:20 | Everybody’s Trying to Sell
14:04 | Teamwork Makes the Dream Work
16:01 | Time Is of the Essence
22:56 | When I’m 64
24:56 | Get Your Dancing Shoes On
27:35 | The Force Has Been With Him

Resources and Links:

[00:06:27] And then, of course, people get older, as I'm getting older at the moment. And I'd like to leave a legacy to my kids. So how do we manage that through the structuring? So we're looking at whose name should be on the next property. Because you want to leave it to the kids. 

This is Property Investory where we talk to successful property investors to find out more about their stories, mindset and strategies.

I’m Tyrone Shum and in this episode, we’re back with Shukri Barbara, founder of Property Tax Specialists. We’ll hear about how he’s so committed to his clients that he’s working through his retirement, a story about a happy client who’s now in the United States, and the surprising artistic talents he’s been hiding from us all— until now!

Tyrone Shum:  

Barbara pinpoints the GFC as one of the worst moments in his journey.

Shukri Barbara:   

[00:00:12] We were just starting to get properties into Super funds, and into trusts. And we were dealing with someone who was going to help out. And we had a contact where a builder guy who sells properties, he was going to refer a lot of people, and he was testing it out with one property for himself. And right in the middle of the deal, the lender stopped. We couldn't get him to talk to us, we couldn't get anything. So it just killed it right there and then. 

 

[00:00:48] And that kept the things going like that for about five or 10 years afterwards, until things eased off. But through those experiences, life experiences with property and so forth, and people more to the point— because it was people running things—you could learn how to, when to, what does it look for, how to warn somebody else doing the same journey on what to look for. And of course, during that time, we kept developing our own knowledge.

Tyrone Shum:  

He realised he needed to do something in property after learning about family trusts.

Shukri Barbara:   

[00:01:42] When Dad sold the properties, the properties were held in family name, it wasn't just one person in the family. So there was five of us in the family. And all names were into the properties. And at that point, the aha moment was, look, we can't physically manage everything. And I was busy trying to build a practice up. So I had a business as well. And I couldn't rely on Dad getting older and the other kids weren't interested. So we had to shuffle things around and make it. So the aha moment is actually refocusing the wealth away from investment into owners, into homes and main residences.

Tyrone Shum:   

[00:02:37] So those properties that you mentioned, were they commercial properties?

Shukri Barbara:   

[00:02:41] The two blocks we sold were units, blocks of units that were sold. And then the cash was reworked so that each of the members, Mum and Dad as well as the kids had their own main residence.

[00:03:01] That worked very well, because we cut the bank out.

[00:03:06] Especially with high interest rates at the time. And that facilitated a whole lot of things. And it also gave me a bit of room to build the practice a bit more, so I wasn't having to make repayments in a tough market and so forth.

Tyrone Shum:   

[00:03:22] That's a smart strategy. And I guess it's just a matter of timing to be able to get that out there, then. And then when you actually moved on to sell those, and you reinvested those funds, too— what happened after that?

Shukri Barbara:   

[00:03:33] We haven't. I got married. I just did not have enough cash after that, putting kids through school and actually buying our own house and building it, we knocked down and rebuilt as well. And so I had to get a bit more help from the families to do the construction and so forth. And between paying private school fees, and trying to do things, we're okay at home. But I didn't go back into the property market, because I always needed some massive deposit to get in. And, of course, the wife was always a bit reluctant. So at the moment, we're comfortable. And we don't have to worry about the bank as such.

 

[00:04:26] I'm actually trying to get Helen to help me out with some commercial properties so that we're on to the cash flow positive type space, looking into the future, so that if I drop dead, then the family's still got some income.

Tyrone Shum:  

He sees his relationships with his clients as the main focus of his practice.

Shukri Barbara:   

[00:05:13] We've always said, 'What do the clients want at the end of day?' Because, the first thing is, of course, the clients. Nobody cares how much you know, until they know how much you care. So once we've established that relationship of trust, then we try and understand where they're at. And inevitably, the common theme is always to, firstly, we've made some money, we're using property as a class of asset, then how can we make sure it's protected? So that if something in the business goes wrong, the creditors don't come back and take it all up. Because you don't want to have the kids sleeping on the gutter. 

[00:05:58] Of course I do qualify that by the idea is we're not trying to defeat the creditors get their rightful debts back. Because that's illegal. But we're trying to make our arrangements so that the risky assets sit in a different structure from the passive assets, such as the investment properties. So the businesses are managed separately from the properties and the investment portfolio that's there. 

Family is very important to him, and his main goal in life is to help his children in every way he can.

[00:06:27] And then, of course, people get older, as I'm getting older at the moment. And I'd like to leave a legacy to my kids. So how do we manage that through the structuring? So we're looking at whose name should be on the next property. Because you want to leave it to the kids. How do we transfer it without paying capital gains tax or stamp duty? How do we allow for the person who's going to get it and the effects of land tax? How do we work all that within what the person wants to do? How old they are? How many in the family? Is it a blended family, where you've got two lots of families, and if something goes wrong, somebody is always going to make a claim on whatever's there. There's all these things. 

[00:07:21] At the same time, everybody, as I'm getting calls right now, right now I am answering all my calls is I'm selling the property because the market's so good I don't want to pay capital gains tax. Well, okay. Let's have a look. It is probably possible. The last call I had, I found out that they were in the main residence exemption space, even though they rented the property out, their main residence exemption was extended through the six year absence rule, they really didn't have to pay anything. So literally, they're not going to pay anything. 

[00:07:57] Or the alternative. Like other people, they'll say, 'Well, we did buy another property because you're only allowed one main residence with exemption at any one time.' Well, okay, what's the value of each one? You work out which one is more expensive and growing faster, and the tax on that will be a lot more, you want that to be exempt. Not the old one. Because it doesn't cost as much.

 

[00:08:20] So these are the things. Other people come up and say, Listen, I talked to you a year ago. And this was around COVID time around March, April. She rings me up again. She says, 'Look, we had this duplex, we were living in one, renting the other one out.' I said, 'Okay, what's the problem?' 'Well, the market was good so we sold the one that was rented out. But it was so good I got an offer for the second one. So I sold that out! So we sold both!' So what's the problem? ‘Well, actually, for the last two years, I had to go back and look after Dad because he was very sick. He's just passed away. And I just bought my sister out of that house. So now what's my tax liability on the rented one and the old main residence?’ 

[00:09:10] So everybody's trying to sell. How do we minimise the tax? There are opportunities, plenty of opportunities, you've just got to know where the tax is, how you start to put it together, because basically capital gains is not hard, is your selling manners, your cost base, and if I can raise the cost base and minimise the selling cost, well, I've cut down the amount that you're going to calculate tax on.

[00:09:37] One bloke just sold his main residence. He was a non resident, he's actually gone over to the United States to work. And when you're a non resident these days, the tax is really terrible. But he sold his property while he's there because he wanted to use the money to buy something over there. So he doesn't get any concessions, he gets taxed. I said, Well, okay, let's have a look at your cost base. If you just look at it on price, the cost base, he made capital gain, but the cost base also included his maintenance fees, his interest. Because in all the years he lived in it, he didn't get any rent. So all that forms part of your cost base. So now it's on breakeven, he's got a little bit of a capital loss. So there's no tax.

Tyrone Shum:   

[00:10:35] Must be one happy client, then! 

Shukri Barbara:   

[00:10:37] He's very happy about that. So there's a couple of ways to help people out. And again, it's just to get to their goal, what do you want to achieve?

Tyrone Shum:  

He believes the best strategy is to plan ahead, based on your objectives in life and with property.

Shukri Barbara:   

[00:11:17] Once you're in a particular position, it's very hard to change. And it's not hard to change, it's expensive. Because if the property has grown in value... I get a lot of people like at the moment, what's happened is the revenue New South Wales have worked out their technology to the point they're data matching a lot of the ownership with Titles office, and some information. 

 

[00:11:43] We had one client where Home Security, they could find out who was in and out of the country. And they say, well, you're not a resident, so there's the land tax surcharge, if you're a foreign person. And of course, if you're a surcharge, you're paying a surcharge on land tax. So you got the basic land tax, on top of which there's a surcharge, which is very expensive. 

[00:12:13] So I get the call saying, 'What the hell is this?' And I say, 'Well, okay, can I shift the property out from my name into a trust or something, or out from the trust back into my name, to reduce the land tax?' Sure, you can, sure, but you're gonna have to come up with money for your stamp duty and your capital gains tax. Because the reason the land tax is higher, also, because land has gone up, and the property values have gone up.

Tyrone Shum:   

[00:12:46] And it's quite expensive exercise to shift things out. That's why you have to plan it way, way in advance. Because you learn the hard way until you've actually been there.

Shukri Barbara:   

[00:12:53] This is it. But we look at also, if you're going to save some money by doing that, we compare the savings with the cost. If it's going to take you two years, and you're going to make it up, okay, that's not too bad. If it's going to take you 10 years to make it up, well, why pay the cash now? Then we can try and use timing, because timing is another issue that can help out. You pick the time to create the taxable amount in a year when you're retired, or you're taking a year off where you don't have other income.

Coming up after the break, Barbara shares his early mentors...

[00:14:23] He was very kind to me, whenever we ordered trust from his firm, he would explain it. And I labored the questions until I really got it.

The importance of good relationships and knowing who to turn to...

[00:16:22] Michael Carruthers and all the team there, there is Kareena there, there's Ray, the team at Knowledge Shop are just absolutely sensational. I've been with them for over 20 years now and they really helped me out. And they were instrumental in the growth of my practice.

He praises his teammate Amir Ishak and the great work they achieve together.

[00:23:38] Together, we present the client with something they don't get anywhere else. I talk a little bit about their journey, understand how they fit in, Amir will pick up on the numbers extremely quickly. He's usually very, very good with that. 

And that’s up next. I’m Tyrone Shum and you’re listening to Property Investory.

Tyrone Shum:  

Barbara has learnt from everybody over the years, but one particular mentor in his early days made quite the impression.

Shukri Barbara:   

[00:14:04] Over the years we started out, there was a guy called Chris Balalovski who helped me out a lot with understanding trusts. Because trust is a very difficult area, and to understand the legal concepts and how they work. He was very kind to me, whenever we ordered trust from his firm, he would explain it. And I laboured the questions until I really got it. And then I took additional reading and along with the Tax Institute and so forth, there was a lot of material, we spent a lot of time trying to read over a long period. You can't get it all in one go. 

[00:14:46] Then there is Margaret Antunes, who is a lawyer, she's terrific also, helps out, she’s a broad thinker, tells you how it's coming. Because it's not only about the numbers. It's about life. The numbers have to reflect life. So in terms of life, the family group that you're helping out, whose what can be affected? How can we do it? Sometimes you might be trying to get the principal right. But if your savings is only $2, and it's going to cost you $200,000 to get it, what's the point?

Tyrone Shum:  

[00:15:24] You wouldn't do it.

Shukri Barbara:   

[00:15:25] So you've got to have cost benefit analysis coming through as well. But I learnt from everybody. There's a cross section of people in the professional side, these do sort of stand out. But then we joined a group called Knowledge Shop, which is a group for accountants. And a couple of those people were very instrumental, Greg Hayes and Peter Knight, because they had the firm, Hayes Knight. And they're the ones who developed the Knowledge Shop concept. 

Time Is of the Essence 

Tyrone Shum:  

His relationships with people in his field are instrumental, especially how busy he is with his family. He always has people to turn to for answers to tax questions.

[00:16:01] Michael Carruthers, who runs the tax side of things, he is absolutely terrific. He's terrific, because they support us little accountants. If we don't know something, or we want a quick answer rather than sit there for an hour reading their stuff, we ring them up and say, 'Listen...' and then they point you to where the material is. Fantastic. Michael Carruthers and all the team, there is Kareena there, there's Ray, the team at Knowledge Shop are just absolutely sensational. I've been with them for over 20 years now and they really help me out. And they were instrumental in the growth of my practice.

 

[00:17:04] The thing is whether you have time, whether you have enough time. From the time I wake up into here, and then go home, I gotta listen to the kids and still allow for the family on top of everything else. There's not enough time to read. And some of the concepts are quite difficult, like a lot of the changes they've just put through. And the only reason I can get it a little faster than somebody new is because I have the history. Because I know what has happened and I'm quite involved in public issues. So I can understand why they want to do these changes. And because we get involved with the Tax Institute and CPA, and the Knowledge Shop, we've been gradually building our background in the situation. So that is what makes it a lot easier for us than for somebody absolutely green starting out.

Tyrone Shum: 

Finding time to read may not be as easy now as it used to be, but earlier in his career he took in a lot of knowledge through authors such as Robert Kiyosaki, and some other notable names.

Shukri Barbara:   

[00:18:30] I started out reading Jan Somers. That really kicked off this whole focus on property. Michael Yardney was another fellow who was very kind to me, he took one of my articles and published it. As a result, I got a lot of inquiries. He's still out there, he's doing a lot of things. This is in terms of property rather than the tax side. 

[00:18:58] Dymphna Boholt's program. I'm always fascinated. I don't always agree with Dymphna on her Tax Administration, or the way she goes, but the numbers she comes up in terms of property in the market is just sensational. I acknowledge these guys, because the way I became interested and focused on property is because I used to go to all the seminars that my clients used to go to, because my clients did not know how to tell me what they wanted. They couldn't articulate it. So I said, 'I'm going to sit in the meetings, and I'm going to listen to the seminar. And then we can talk, we can find out how to help you out.' So that's how I developed the practice. Because I'm there. They don't have to try really hard to tell me the concept they've just heard.

Tyrone Shum:  

For anybody not well-versed in the world of tax, it can be an overwhelming process to say the least. Barbara understands this and tries to simplify it as much as he can.

Shukri Barbara:   

[00:20:29] I try to just make it simple if I can, because they go and they listen to these things. And they say, okay, also, there's a great idea. Okay, but how do you actually make it work? And which bits do you have to do in order to make it happen? And that's what I try and do. I try to support the client.

Tyrone Shum:   

[00:20:52] If you had met yourself, say, 10 years ago, what do you think you would have said to him?

Shukri Barbara:   

[00:20:58] Go out more. 

[00:21:07] My wife reminds me we've been married 17 years now. And we got married quite late, and so our kids are quite young. But 10 years ago, I would have probably done a few more things in the practice. Not that I haven't tried, I've tried to take on people to work for me and partners. Sometimes they'll come in and they work and they learn everything. And then they go their own way, or they want to do something different, travel or something like that. But I wouldn't have minded to try and build the practice a lot faster.

[00:22:08] Just take a bit more holidays. My focus, one of the reasons why I probably haven't, and so forth, is because for good or for bad, I have always put the clients first, even before me. And sometimes, that doesn't help in a family situation. But I've always tried to say, ‘Look, the clients pay me. And I'm going to try and give them the best.’ So if I have a lot of calls late, if I have to get out of my way to get them done, then that's what I'm going to do.

Tyrone Shum:   

[00:22:49] And hence the reason why your clients stick with you for long term.

Shukri Barbara:   

[00:22:53] I hope that's the reason!

Tyrone Shum:   

[00:22:56] Excellent. Let's talk about five years from now. So what are you most excited about your journey in the next five years?

Shukri Barbara:   

[00:23:03] Well being I'm 64 and I'm relatively on top of my game at the moment. But there'll be a little bit of a change perhaps in the way I do things here, in that I'll help Amir. Amir is pretty much running most things now, in the practice. So I do a little bit of the talking to people and understanding where they're at and seeing what they need, together with him, because he's very good on the numbers as well. And he's very smart. So together, we present the client with something they don't get anywhere else. I talk a little bit about their journey, understand how they fit in. Amir will pick up on the numbers extremely quickly. He's usually very, very good with that. 

[00:23:53] So when we bring it together to the client, we bring out pretty much what he wants to do, whether it's good or not, and whether the numbers work. And hopefully, that takes the client forward, a lot more comfortable in what they're doing, how they're doing it. So as we go for the next five years, with my youngest being only 12 years, and I hate sitting around at home doing nothing, I expect that I'll probably do work but it will be a retired. Because I'm supposedly retired. 

[00:24:30] Amir is running things and I'm trying to cut down. I have cut down a fair bit, but as I say, when you see me in the media and so forth, it's just to promote the whole practice rather than anything else. But we still do a lot of difficult questions come to me and we try and solve it together, Amir and I, and the client gets the best of us.

Tyrone Shum:   

[00:24:56] Fantastic. Just any hobbies that you would like to pursue as well, too, during this stage?

Shukri Barbara:   

[00:25:02] Yes. You know, tonight I'm actually taking my wife and going dancing. 

[00:25:12] Oh, nice!

[00:25:14] Yep, tonight is salsa night.

[00:25:18] It’s a great dance.

Shukri Barbara:  

[00:25:19] The last time I danced with my wife at a school— because I used to do rock and roll— when we got married, the first year, a few months after we got married, we decided to do something and we went down the RSL and we took a rock and roll class. It's an eight week program. By week four, she says, 'Listen, you're turning me too many times, I'm getting dizzy.' By week five, she says, 'I'm gonna sit down.' And then she comes back on the Monday of that week, and just says to me, 'Well, guess what? Yes, I'm pregnant.' And that was the last time we actually did formal dancing together. 

[00:26:03] So now that the youngest one has started in high school, we can leave them at home and we can go out dancing. So yes, I would like to talk myself in dancing, get back to rock and roll, do a little bit more of the Latin. I also like to draw. I used to take a life class, before I got married, years before, and I'd like to get back into just pencil and charcoal and that sort of stuff. 

[00:26:34] My wife, she's taken up water painting as well. So yeah, that's a couple of the things I'd like to do, particularly portraits. I'd like to do portraits with the charcoals. To capture the people's essence. I don't know whether you see the program with Anh on the ABC where he paints the people he interviews?

[00:26:56] Yes. I love that so much.

[00:27:00] He’s such a talent.

Tyrone Shum:  

[00:27:03] Yeah, exactly. It’s amazing how he can have a conversation while still being able to creatively paint the picture. How do you do that, Anh?! It’s such a great skill to have. 

Shukri Barbara:   

[00:27:22] I remember when I went to my wife, I caught her fancy at one point, an important point, with a poem. So I don’t mind going back to poetry as well.

[00:27:35] Amongst your journey and what you’ve accomplished and so forth, how much of your success do you think has been due to your hard work skill and intelligence? And how much do you think is because of luck?

Shukri Barbara:   

[00:28:01] There's been a lot of hard work, mate. There's been a lot of late nights. In the past, I have been in here from 8 o'clock in the morning till 8 o’clock [or] 10 o'clock at night. And I've slowed that down a fair bit. As I say, I'm retired. But building up to whenever Amir came along, there's been a lot of late hours. But as Obi Wan Kenobi says to Luke Skywalker in Star Wars, the force is with you. And I think the force has been with me!

Thank you to Shukri Barbara, our guest on this episode of Property Investory.