Money: Client battles his accountant in tug of tax

Who owns a client's files? Who owns the tax refunds? Weekend Money looks into accounting practice.


By Mary Holm
Money Matters


Q: I used a Hamilton accountant from 1981 to 1991. In 1994, after realising two years' tax returns and GST returns had not been filed, I changed accountants.

I had been told the "next week", "next month" thing for six months before changing accountants.

In order to complete the outstanding returns I had to go to the IRD and obtain information on previous years' returns for myself, wife, company, etc.

Over recent years I have asked the accountant for my general journal, tax files, etc. I am given the excuse I owe him money - how much I don't know because I have never received an invoice.

I know an $11,000 tax refund was banked in the accountant's name. An IRD man traced the two tax refund cheques that were banked by the accountant. He said I "would be well advised to change my agent".

I would like to know who actually owns the documents I want, and am I privy to a copy, or can I view the documents?


A: To be blunt, I'm not sure who's more to blame for this mess, you or your accountant. Didn't you notice that you hadn't filed tax returns? Didn't you wonder why the accountant had never billed you, and why you never got the $11,000?

Still, you're trying to remedy the situation, so let's concentrate on what to do now. Firstly, ring the Institute of Chartered Accountants' Hamilton office, on 839-4763, and find out if your bloke is a member.

If he's not, you'd better see a lawyer, not only to take steps to recover your records, but also the $11,000.

If your accountant is an institute member, write to Arthur Bartlett, the institute's secretary of professional conduct, at PO Box 11342, Wellington. He'll look into the situation.

Mr Bartlett says that, unless you gave the accountant written permission to bank your refund in his account, he shouldn't have done that. He adds, though, that quite frequently clients who owe their accountant money do grant that permission. So cast your mind back, to be sure you didn't.

He also says that clients are generally entitled to all their records - although accountants can retain their own internal work papers and client questionnaires, and can keep a copy of clients' records.

But if a client doesn't pay the accountant's fees, the accountant has a right, in common law, to retain the records until payment is made, says Mr Bartlett.

Things sometimes get tricky if the client claims the fees are too high. "It's not a satisfactory area," he says.

Your case, though, seems more muddled than that. With any luck, Mr Bartlett will be able to help you sort it through.

Q: Twenty-five of us formed a share group partnership some five years ago.

We each put a minimum of $50 into our partnership every month, and the attendees at monthly meetings make decisions re investments. Our investments tend to be in New Zealand shares (not blue chip), and some Australian shares.

When the group was established we were fortunate to have an adviser who helped us set up the group and gave advice on investments for a very small, profit-based, fee.

Our adviser recently retired, and it is more difficult (and risky!) for us to make investments, despite the fact that many of us have gained a great deal of knowledge over the years.

Can you suggest a way forward for us? Would it be better to "disband" the partnership and go our separate ways?

As individuals we have gained knowledge from participating in the group, and many have starting investing on their own behalf.

Do you think that groups such as ours are a remnant from the past and investing is better left to "professionals"?

There has been considerable empowerment in what we have done. We have been able to keep a lot of focus on ethical investments.

It seems to me that giving away our power to a trust fund or whatever is not a wise (or empowering) direction to go in. Your thoughts on this matter would be welcome.


A: It's crunch time at the share club - time to think about what you are all getting out of it. Unless you're unusually lucky, it probably isn't optimal returns.

Even with a good adviser - and it's great to hear that she/he worked for a profit-based fee - it's not easy over the years to do better than a share index fund. That's especially true if you trade often and so pay lots of brokerage.

While the adviser, and your increasingly well-informed members, may know lots about a potential investment, that knowledge is usually already "in the market", and so reflected in the share price.

If you expect a company to do well, it's price is likely to have risen already. Its profits might soar, but the share price might not.

So, despite your reluctance, a managed fund might be the best way to go.

I don't think, though, that the professionals who run many of those funds are necessarily any better at picking shares than your group would be.

That's why I favour index funds, in which nobody selects shares. The fund simply holds the shares in the index. It's much cheaper.

But - and this is a big but - it sounds as if you're getting lots out of the club besides investment returns.

If you're feeling empowered, that's great. If you like to know your investments are ethically wholesome, that's great too.

You're probably also learning about the economy and about how businesses should and shouldn't be run. You might all become entrepreneurs, or at least better informed employees and voters.

Perhaps most important of all, it sounds as if you're enjoying yourselves.

If that's the case, I suggest you either keep going, or give up the investment side but continue to meet, perhaps as a book club. You could discuss books on investment. Or why not novels?

Q: I have been reading your recent columns on Bonus Bonds, and was delighted to find an 0800 number one could ring to check if one had won any prizes.

I rang it the other day, only to be answered by a surly curmudgeon who refused to say anything other than, "We can't update addresses over the phone, you'll have to go to an ANZ Bank". He kept saying this although the actual question I asked (three times) was: "Can you check for unclaimed prizes?"

I feel the ANZ Bank is wasting its money, and clients' time, with this so-called service. In the end, I decided to write to them, but not to hold my breath waiting for a reply as the concept of service doesn't seem to have penetrated deep into the Bonus Bonds administrative culture.


A: Oh dear. There I was, hoping to hear from someone who discovered they had won $300,000 years ago, and didn't realise. Instead comes this.

It shouldn't have happened, says ANZ. And somebody has chatted with the curmudgeon about his phoneside manner.

The trouble is, the Bonus Bond Centre has recently been swamped with phone calls - presumably many of them Money Matters readers.

Perhaps the cheery chappy hadn't had a chance to have his morning cuppa.

ANZ spokeswoman Samantha Shaw says problems sometimes arise when a caller can't give enough info to satisfy the Centre that they are who they say they are - although that doesn't seem to be the issue here.

The system is supposed to work like this: If you ring 0800 804 600 and give the Centre your Bonus Bond numbers, it will tell you whether you've won an unclaimed prize. If the prize is fairly small, and you can give the address the Centre has on record, it will make arrangements, by phone, to pay you.

But if lots of money is involved, or you're ringing on behalf of a relative, or you don't have your Bond numbers - or there are any other complications - you will probably have to write to the Centre, and/or go to an ANZ branch to give identification.

All of this is done, says Ms Shaw, for customers' protection. She acknowledges, though, that curmudging is not meant to be part of the service.

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