Accountant Costs

[willy1111]

Hi Guys,

Just recently been to see our accountant to do the tax returns for last financial year ending 30 June 2005 - and after taking us through the returns he presented us with his bill for $5,000 ! ! !

I know it is probably hard to compare everyone's situation but I wanted to bring it up anyway.

Between my business partner and my girlfried - we have about 8 returns to be done - 2 Unit Trusts & 1 Company, 2 Family Trusts, and 3 Individual returns.

I do all the book keeping through out the year and present everything to them very nicely in a lever arch file together with a CD of the MYOB accounts. In the lever arch is everything, balance sheets, profit and loss, bank reconciliations, Bank statements, GST Statements, PAYG Summary sheets, and for us as individuals a summary list of all income received and a list of possible deductions with amounts.

It looks like they have just taken this information - typed it into their pre-formatted accounts, worked out the depreciation and then distrubed the income down through the right channels. Pretty simple stuff really - I would expect a junior at H & R Block would be able to do as good a job.

The thing really getting my goat up the most is that on top of this they have not provided any tax planning or suggestions for how we could go about minimising our tax - which I have asked about many times.

Heck if you are paying $5,000 I at least expect some suggestions to be thrown my way.

Towards the end of the meeting I asked him - so how can we get the tax bill down?? His response was - your earning the dollars you have to pay the tax. I then said to him - what about private health cover - (given we have to pay a medicare surcharge of about $1,700) - his response - ooohhh yeah you could do that.

I also asked him if we could claim anything else - his response was - get me the receipts and we'll see. Shouldn't he be rattling off some expenses we may be able to claim??? I have seen DGG saying something about a family trust may be able to claim the cost of a CD. So instead of buying it personally with after tax dollars - let the family trust buy it with pretax dollars. Not sure if that is exactly right but something along those lines.

And another thing is our HECS - I had worked out earlier in the year that the HECS that we would pay in the tax return would pay out our HECS in full. So with this knowledge in mind I was going to make a voluntary contribution before we lodged our tax returns and receive a 10% discount. A saving of about $1,200. When I gave him all our info about 2 months ago to do the tax this was noted on our individual summary sheets - But when we were going through the returns just recently I noticed the HECS in the return. I mentioned to him what I was planning to do and he said you should have paid it months ago and that he couldn't change it in his system because that is what is showing on the tax office's system.

Isn't he meant to be the expert giving me the suggestions, things such as what personal items may be able to be bought in the Family Trust with pretax dollars???

If I felt I was receiving good tax minimisation advice I would probably wouldn't mind too much about the bill. And this guy does own investment property and he is into shares.

It might be time to find a new accountant - or am I being too harsh. Dale are you taking on any new clients???

Cheers

 

[coastymike]

Willy,

I don't think you are being too harsh. I think $5,000 is a fair price for those number of returns and the fact that you have your affairs is good order.

You should however, as you stated, be provided with some proactive advice such as contributing to a private health fund as you and your partner are obviously earning over $100K and not contributing to a fund and therefore incurring the medicare levy surcharge. You may as well at least get something for it rather than paying out extra money to the government and getting nothing more than you would under standard medicare. It's not as though they treat those who have paid the medicare levy surcharge any differently.

The accountant should also be looking at the trust distributions and informing you that as of next financial year the low income earner threhold increases to $600 and therefore it should be possible to distribute more money to children under the age of 18 without incurring the top marginal rate (provided they don't change the amount of "unearned income" that under 18 year olds can earn). This will at least go some way towards paying the costs of maintaining these structures.

Don't know your age but if you are over 55 then a lot of changes have occurred in the 2006 Budget and you should at least be made aware of those changes and plan accordingly.

With respect to the charges a lot of clients are curious as to what accountants do when the work is in such pristine condition. Surely they just pump the data into their system and out comes the financials and the tax return (any monkey could do that). Which is a fair comment. Your accountant should however be looking at :

1. Depreciation rates on new purchases to ensure that you are maximising your depreciation claim and using the correct rates;
2. Determining any prepayments and apportioning them accordingly (when they are not incurred by an STS taxpayer or an individual);
3. Determine whether you should be an STS taxpayer and explain the benefits of doing so (if you have high debtors and low creditors then it can be great from a timing perspective and the depreciation rates are fantastic);
4. Reconcile GST & PAYG to your BAS returns and financials. Ensuring that your submissions are correct. Making sure that you claim GST on hire purchases correctly (some people with turnover greater than $1M who should be on an accruals basis are still claiming GST over the life of the HP - it should be up-front);
5. Ensuring that appropriate trust resolutions and that the distributions comply with the trust deed;
6. Determining whether legal expenses are deductible;
7. Ensuring that there are no Division 7A issues;
8. Maximising your trust distributions between the various individuals. There is a great program called MOTHER that can ensure maximum distributions (it also takes into account family tax benefits.

Anyway it does sound like you are not getting proactive advice just straight compliance work. People should always expect proactive advice but a recent ATO study has confirmed that the number of practitioners is declining and the number expected to retire in the next 5 years is alarming. It will get to the stage where we have to stop taking on new clients and the minimum fee will be a certain amount. We no longer take clients who have a total annual fee less than $500. It's not that we don't like simple I returns or the people it's just that the workload is increasing rapidly as practitioners retire.

 

[ggumpshots]

I have been quouted betwen $250 and $2200 for a discretionary trust tax return from several sources, which required less than 3 minutes to fill in imcluding my name and address.
Needles to say I do it myself. If it was complicated i would ring the tax office ..........twice............!!!
once I know my limits I would get an accountant.
You are paying someone else so your time can be used productively and for their expertise................
Give your acountant the flick and interview another before giving them your business.
Heck I think you could fly to Melbourne and spend some time with dale then spend a week in NZ with some change..............but dale has increased his rates.
Always get at least 3 quotes if you can.......you will be surprised many times

 

[coastymike]

Ggump,

I agree that if you know what you are doing it is sometimes cheaper to do things yourself. My only concern is that with two family trusts and two unit trusts involved you need to consider Division 7A, trust loss provisions, family trust and interposed entity elections (whether they need to be made or not and depends on losses and distributions to other trusts) and these things can get quite complex.

I am always reminded of a an ex client who wanted to wind up their company and I quoted around $5K to assess the tax implications. They figured it was too expensive so they went elsewhere where they were told no problems you can avail yourself of the small business tax concessions and pull it out tax free. They wound it up and didn't consider the Division 43 issues. They then got an audit and was informed that they undeclared unfranked dividends and paid a massive amount of tax. All could have been avoided if they had considered Division 47. They came back after the event to ask whether they could object. Unfortunately they couldn't and for $5K could have saved around $40K in tax.

 

[Smile]

Im curious, how many hours would it take for an accountant to do a return like the one willy has prepared?

.

 

[coastymike]

Smile,

In my view the amount of time taken to complete a task is a poor indicator of cost. Should a world class surgeon who has performed multiple brain surgeries be paid less than a fresh surgeon because the world class surgeon takes half the time than the fresh surgeon.

It's like the old fable from Henry Ford when asked why his mechanic charged him $1,000 to fix the machine when it took only 10 minutes. The mechanic changed the bill to read 1. fixing the machine $10 2. knowing where the tinker $990.

It's knowing where to tinker that is more important than the time taken.

 

[redwing]

Coasty..you dont mind paying if the money saved is more than the advice costs..the amount of accountants i've spoken to who when questioned agreed that "yes" i could do what i proposed..WHY didn't they tell me beforehand ????

Now I realize it's up to you...

The more you know..the more you can do..also..NO is not an answer just a viewpoint (moreso Mrtgage Brokers here)

 

[coastymike]

Redwing,

I agree wholeheartedly. You should be receiving value for money. What usually annoys me is those people who want to pay low fees, expect the accountant to be proactive, call them to make them aware of changes, must be up-to-date, let them pop in any time they feel like it to discuss changes to their business, keep the proprietor up-to-date and all for a bargain basement price of $250.

As i've said before If I wanted to be a charity i'd be out on the streets handing out food parcels and working in a soup kitchen (as an aside i do work occassionally in a soup kitchen ).

It is disappointing however when you pay good money and then have to advise the advisor.

 

[DaleGG]

And to that, I say .... Amen!!!!!

Redwing,

I agree wholeheartedly. You should be receiving value for money. What usually annoys me is those people who want to pay low fees, expect the accountant to be proactive, call them to make them aware of changes, must be up-to-date, let them pop in any time they feel like it to discuss changes to their business, keep the proprietor up-to-date and all for a bargain basement price of $250.

As i've said before If I wanted to be a charity i'd be out on the streets handing out food parcels and working in a soup kitchen (as an aside i do work occassionally in a soup kitchen ).

It is disappointing however when you pay good money and then have to advise the advisor.

 

[ggumpshots]

Ggump,

I agree that if you know what you are doing it is sometimes cheaper to do things yourself. My only concern is that with two family trusts and two unit trusts involved you need to consider Division 7A, trust loss provisions, family trust and interposed entity elections (whether they need to be made or not and depends on losses and distributions to other trusts) and these things can get quite complex.

I am always reminded of a an ex client who wanted to wind up their company and I quoted around $5K to assess the tax implications. They figured it was too expensive so they went elsewhere where they were told no problems you can avail yourself of the small business tax concessions and pull it out tax free. They wound it up and didn't consider the Division 43 issues. They then got an audit and was informed that they undeclared unfranked dividends and paid a massive amount of tax. All could have been avoided if they had considered Division 47. They came back after the event to ask whether they could object. Unfortunately they couldn't and for $5K could have saved around $40K in tax.

Good posts Coastymike
To Argue against myself ,
How do you know when you dont know something if you dont know about something you need to know.............do you know what I mean

maybe a good analogy maybe of the costs involved in panel beating which seem extravagent to the untrained eye and so there are other factors facing acountantants that one may not be normally aware of.
Having been given a quote of over $2000 to do a Tax trust I can say without fear of contradiction it was ludicrous . Earnst and young was the company. if they wanted to get rid of methey did a good job

 

[Rolf Latham]

Sounds like a bargain to me

ta
rolf

 

[Ricardo29]

my motto:
never mess with a) your finances, b)the law, c)your health.

learn the basics on each.
and then with any doubts/higher level advice needed, happily pay for trustworthy help on each.

without health, not much good being rich.
not much good being rich, if in jail.
not much good being poor, if healthy and law adiding...they all coexist!

 

[Bantam Roosta]

my motto:
never mess with a) your finances, b)the law, c)your health.

And don't forget d) the wife.

It doesn't matter how rich, healthy and free you are, if you don't keep the missus happy life just isn't worth living.