Taking on a new client rarely means simply picking up their next tax return. There may be outstanding returns, overdue tax, provisional tax payments around the corner, historic tax positions that still matter or Inland Revenue correspondence waiting for a response.

So where should you start? 

Every client is different. An individual with relatively straightforward tax affairs will require a different review from a business owner with a company, trust and other associated entities. The following are starting points rather than an exhaustive list of tax matters to consider. 

Understand what you are taking on

If another adviser has previously looked after the client, the handover is a natural place to start, i.e. completing appropriate due diligence as part of your onboarding procedures in accordance with professional and ethical standards (including the NZICA Code of Ethics).

What you need will depend on the client, but it could include previous income tax and GST returns, financial statements and tax reconciliations, fixed asset schedules, loss schedules, imputation credit account (ICA) records and shareholder current accounts.

Look beyond the documents themselves. Are there tax treatments, elections or positions taken in earlier years that will continue to affect the client?

Also find out what tax work is already in progress. Has a return been prepared but not filed? Have provisional tax calculations or estimates been made? Are there outstanding information requests, objections, disputes or other dealings with Inland Revenue? This can help avoid duplicated work or an important action being missed during the handover.

Establish which taxpayers and entities you are looking after and the tax obligations relevant to each. Depending on the client, these may extend beyond income tax and GST to employer obligations, FBT, withholding taxes and other tax regimes.

See what Inland Revenue sees

Once you have the appropriate authority to act and access through myIR, compare Inland Revenue's records with what you have received from the client and previous adviser.

Are the expected tax types registered? Are there unfiled returns or overdue payments? Is there Inland Revenue correspondence that still needs a response?

If there is tax debt, get a clear picture of it. How much is outstanding? Which periods and tax types does it relate to? What interest or penalties have been imposed? Is there already an instalment or other arrangement with Inland Revenue?

Know what is coming up

Once you know where the client stands today, look ahead.

For provisional taxpayers, check which calculation method they are using, what has already been paid and whether their current-year position has changed significantly from what was anticipated.

Has an estimate been made, or are there elections or previous calculations you need to understand? Have payments been made through a tax pooling intermediary, and are there transfers still to be completed?

Identifying changes early gives you more time to consider the client's provisional tax position, cash flow and any potential use-of-money interest implications.

For GST-registered clients, check their accounting basis and filing frequency and make sure returns are up to date. Look for transactions that may require further attention, such as a significant asset purchase or sale, a property transaction or a change in how an asset is being used.

If the client is an employer, PAYE and other employer obligations should form part of the picture too. 

Don't overlook what carries forward

Some issues will not show up as an immediate filing deadline or amount owing, but they can still matter later.

Previous returns may contain tax positions that need to be understood or taken into account in later periods. Depending on the client, these could include depreciation methods and tax book values, elections, losses carried forward, foreign investment calculations, foreign tax credits, financial arrangements or property-related positions.

If a company has losses carried forward, understand whether ownership or business changes could affect their availability under the shareholder continuity or business continuity rules.

Where a company is required to maintain an ICA, review the balance and relevant movements, including income tax payments and refunds, dividends paid and any changes in shareholder continuity.

Shareholder current accounts are another area worth checking, particularly where there is an overdrawn balance. How have drawings and shareholder remuneration been treated? Are there loans to shareholders that could have interest, RWT, FBT, dividend or other tax consequences?

Ask what has changed

The records only tell you what has already been recorded. The client can tell you what has changed since their last return or discussion with their previous adviser.

Have they bought or sold property? Started another business activity? Made a large capital purchase? Begun investing offshore or earning overseas income? Changed their business structure? Taken on employees?

It is also worth asking whether there is anything about their tax they are concerned about. They may not know the technical issue, but they may know there is an issue.

Decide what needs attention first

For one client, the priority might be an overdue GST return. For another, it could be an upcoming provisional tax payment, an Inland Revenue request, tax debt or information missing from the handover.

The aim is to understand where the client's tax position stands, what needs attention now and what could affect them later.