How to interview accountant/broker?

That's really interesting Terry. So what would an accountant do if they were not also a registered tax agent?

A lawyer can give tax advice? That's really interesting. Would they need to be a registered tax agent to do so? Is it common for a lawyer to do that?

 

Accounting is a vast area which i dont know much about. There are management type accountants. Forensic accountants etc. Tax is just one possible major in an accounting degree. Some accountants are also tax agents such as mikelivimgthedream and paul@pfi.

Tax advice is legal advice some any lawyer with a practicing certificate can give advise but most dont unless they specialise in tax or structuring. I give tax advice as a lawyer but only in structuring for property investments. I am not an accountant and dont know anything about the accounting area and i dont lodge tax returns.

I should add that most people use the word accountant interchangeably with tax agent. On the old ss forum there was one poster who was not an accountant but a tax agent and there was one well know accountant that onjected to this person being referred to as an 'accountant'.

 

I have highlighted my situation briefly in my last post, there are, however, more scenarios I need advise on.
Following scenarios apply to me:
- all 5 properties as joint owner except 2 lands which are not settled so I may be able to separate them. Loans should be structured keeping this aspect in mind.
- used money from single offset to pay for 2 settlements. so a mixed loan issue.
- Future plan is to subdivide duplexes and put on separate title. Currently those lands are jointly owned. Considering future plans, is there anything I should take care now so as to avoid issues in future.
- all lands have built up equity which I want to utilize for construction. Some lands have less and some have more than required equity for construction on that land. So, I have to use partial money from one land and use it in construction on another.
- I also have equity in ppor that I have utilized towards settlement of 2 lands. That ppor has a granny flat that is currently rented out. After utilizing equity from ppor towards 2 lands I still have some money left. How to use that money to avoid mixed loan issue.
- After utilizing equities from all properties I will have some shortfall of money which I will pay from my savings(ppor offset). How to use that money in optimal way considering whole situation. Equity loan?

As you can see there are quite a few scenarios apply to my situation. Hence I am looking for a tax specialist (accountant/tax agent/solicitor) who can not only answer my questions but also assess my situation and advise me on things that I am not aware of.

The accountant I am dealing with (and dealt with) have not advised me correctly even though they were aware of my situation. This lead me to make mistakes as described above(mistakes such as joint owner, used un-borrowed money, mixed loans etc).

Their services were not free.

 

Keep in mind that there is no one correct way with structuring. It is like an art form. But there are incorrect ways.

You situation is complex.and there are many ways you might be able to restructure now so as to maximise tax efficiency in the future. An example may be settling on the land in single names now for tax reasons, asset protection reasons and so that you can do some strategies later.

I suggest you go and see a tax lawyer.

 

nice table Dave - but it left out lawyers. It is also incorrect.

 

@Ravi hit up Terry - he does everything you need

Cheers

Jamie

 

Most 'suburban' accountants will be tax agents. Their bread and butter work is lodging tax returns for individuals, companies, trusts, etc. While they may be qualified to advise on tax structuring, their competence will vary depending on their experience and area(s) of expertise.

Many of the accountants that work at the 'Big 4' (e.g. auditors) and accountants that work in-house for corporates will not be tax agents.

Legally this is undoubtably true as most brokers are not qualified to give tax advice. Practically, I imagine it is not that easy.

Often, the broker may be the only professional an investor sees prior to purchasing a property. What does the broker do when their client asks them a question which has tax implications? Refuse to answer because they are not qualified to give tax advise or respond with their understanding of the tax implications (of course with the caveat that they should seek separate tax advice but knowing full well that they probably won't)?

While brokers are not qualified to give tax advice, some of them (including many on this forum) are competent with the basics. In many cases, they will be more knowledgable than tax agents which don't work with property investors.

I'm a tax lawyer but my work involves advising large corporates which, as you would expect, have a variety of different tax issues to those which are relevant to property investors. Although I am 'qualified' to give tax advice to property investors, I wouldn't do so at the moment as I don't have the necessary experience. Being part of this forum is part of a plan for me to up-skill in this area.

Moral of the story - qualified does not equal competent.

 

That is right. I am not an accountant but has a couple of close associate that are. One is Company Accountant, CPA. Never worked as tax agent. Another one was an accountant graduate but did not get a chance to work as tax agent nor company accountant and became a succesful mortgage broker.

 

Cool. Found that on an accounting firms site feel free to correct it

 

I see nothing wrong with a broker, or anyone, point out structuring mistakes in terms of tax or legal issues. But they should be careful they don't breach the legal services act, their ACL conditions and not being covered by their PI insurance by telling a person 'this is how to do it for tax reasons'. They should also avoid telling the client they don't need tax advice, or that their complex situation is simple. The non professional also doesn't know what they don't know (so does the professional too for that matter, but at least they will be trained in this area and covered by insurance).

Avoiding mentioning tax at all is the safest bet as the average joe blow doesn't know a broker cannot give tax advice and may act on this advice which may be wrong. I have seen many clients who have received tax advice from brokers which is wrong and I am itching to sue a broker but so far had no one wanting to take it further.

 

The problem is that it confuses tax agents and accountants. The mistake is the kind I have outlined above. An accountant cannot prepare a tax return unless that accountant is also a tax agent etc.

 

You need to stop confusing people

 

They shouldn't be saying anything at all in respect of the application of tax to their circumstances. That's all there is to it. It doesn't matter how much they've read on forums, nor the subsequent actions of their client, who is their client solely for a different purpose. Are the brokers evaluating the financial investment decision? Why would it be okay to provide taxation advice? They are there for a specific purpose, not to evaluate the investment nor the net result after taxation.

This isn't relevant. The tax lawyer/accountant already has a foundation in taxation principles that isn't replicated by someone who is merely a broker. They will not have the same resources, training, nor authority, which is considered important in such matters.

 

In a utopian world where investors obtain advice from all relevant professionals, I would agree. But that doesn't occur in reality and I don't think you can just ignore that.

I agree with @Terry_w that brokers should "avoid telling the client they don't need tax advice, or that their complex situation is simple". They should actively encourage the client to obtain their own tax advice from a qualified professional. But when asked a tax related question by their client to which they believe they know the answer I think it is OK for them to respond, "based on my experience I think this is the answer but you should get your own tax advice to confirm".

Do you think it is OK for brokers to take into account tax considerations when suggesting how a client's borrowings should be structured? Are they allowed to explain to clients why they have structured their loans in a certain way if that explanation would involve a discussion of tax (if they qualify their explanation by telling the client they should get tax advise to confirm that the intended outcome is achieved)?

 

I think it would be ok for a broker to say, for instance,

"wouldnt you want to take an IO loan on your investment property so that you can pay off the PPOR loan first"

I dont think they should mention tax at all as this exposes them to litigation.

 

And how should the broker respond when the client asks "Why would I want to do that? How would that benefit me? Debt is debt, isn't it?"?

 

There are a heap of tax agents out there and many of them are not great tax advisors.

Cheers, Ivan

 

covered by insurance - that's what it really comes down to. I've seen so many instances where I didn't feel the structuring advice was correct and have suggested some questions to ask for clarification or seeking a second opinion (accompanied by a business card). Right or wrong, the appropriate professional will have indemnity insurance for their advice and others won't be covered.

That said, I do wish accountants and solicitors would also observe this. I constantly have to set people straight about what lenders can and can't do after they receive bad information.

The problem is if you tell someone to get advice from tax specialist they probably won't unless you can emphasise how tricky the problem really is. If you simply refuse to answer, they'll probably ask their mate Bazza at next weekends BBQ and probably get the worst advice possible.

I did ask my own accountant a similar question about how to figure out deductibility when there's two dwellings on a single title with different purposes (PPOR & investment). He wouldn't give me a straight answer because it is a very complex question. A subsequent equity release only makes it worse. I suspect if you ask two different tax advisers even using the same data, you'll get two different answers.

 

Stating a fact such as investment debt may be deductible may be ok. But going any further would be risky for the broker.