What’s involved in changing accountants?

By March 1, 2021 Accounting

Choosing the right accountant can make a world of difference. A proactive accountant will share tax-saving and wealth-building ideas, be available to answer questions during the year and ensure you never end up in the ATO’s ‘bad-books’.

Common complaints

There are two common complaints about accountants.

Firstly, that they don’t provide proactive advice, including wealth building ideas. They are so involved in their day-to-day work that they don’t stop to ask themselves; “if I was in this client’s position, what would I do?” This is an incredibly valuable question to ask. Most clients want to feel confident that if they are missing any opportunities, that their accountant will point them out.

The second most common complaint is that they are not quick to turn work around. This includes replying to emails/phone calls and completing compliance work such as tax returns.  Such delays can cost clients a lot in terms of missed opportunities, delayed decision making and make it difficult to implement financial plans.

What’s involved in switching accountants?

Switching accountants is actually a very simple and easy task.

Once you have agreed to appoint a new accountant as your tax agent, they will immediately write to your incumbent accountant for two reasons:

  1. To confirm that there are no ethical considerations that may prevent them from accepting you as a new client – this is referred to as an ‘ethical clearance letter’ and is common in the accounting industry; and
  2. Request the transfer of your documentation including most recent year’s tax returns, any financial statements, accounting system access, depreciation and cost base schedules, entity documentation such as Corporate Constitutions for companies, Trust Deeds and so on.

As a matter of professional courtesy, virtually all accountants respond to such requests promptly and often without contacting their (past) client. If you owe any outstanding fees, it is commonplace for an accountant to withhold their clearance letter until all fees are paid in full.

Apart from signing an engagement letter with your new accountant, there is nothing you need to do.

Do you have to tell the accountant you’re leaving?

The short answer is no. There is no obligation to have any contact with your incumbent accountant.

If you are self-employed or operate a small business, you may have a close relationship with your accountant and are in more regular contact with them. In this situation, it may be courteous that you inform them of your plans to move to a new accountant, before any ethical clearance letters are set out.  

But there is certainly no obligation to do so, and very much depends on your relationship with them and the circumstances surrounding your departure.

What will my new accountant do after they are appointed?

I can’t speak for other accountants but typically there are a few steps we take when a new client appoints us, namely:

  • Update the ATO’s records so that it knows that we are your new tax agent and where to send future correspondence. It may be necessary to update other registrations also, such as ASIC if you have a company.
  • Review past tax returns and schedules to identify any mistakes, omissions or planning matters. This is even more important if you have a trading business, as there are more matters to consider.
  • Once we have completed a review, we will be in a position to set out your key milestones, which could include the date when we will undertake tax planning, when we will require your information to start preparing your next return and so on.

Does changing accountants attract the ATO’s attention?

Some people are concerned that changing accountants might invite negative attention from the ATO. This is not the case. Approximately two thirds of Australians use a tax agent to lodge their tax return, so it’s natural for a certain number of people to change providers each year. There is nothing unusual with doing so.

How to find the right accountant for you

The best way to find a good accountant is by referral. Speak to friends, family, colleagues and business associates. Someone is bound to have a recommendation for you.

Whilst there are some generic questions you can ask, my advice is to focus your questioning on three topics:

  • How many clients do they have that are in similar circumstances to you? Like with most professional services, experience is critical. If you do something every day, you’re likely to become an expert.
  • What systems do they have in place to ensure that they deliver proactive advice? For example, we have a checklist we complete after each tax return we prepare that forces us to think about the big picture and look for all financial opportunities. Checklists and systems are crucial.
  • How quickly do they respond to questions? There is nothing more frustrating than having to wait weeks for an answer to a simple question. I think it’s reasonable to expect a response to most of your questions within at least one business day. It might not be possible to give you the complete answer within that timeframe, but confirmation that they are working on a response is often satisfactory.

Switching accountants is painless

Switching accountants is a very simple, quick and easy process. In fact, your new accountant can do all the work.

What’s involved in changing accountants?If you are unsatisfied with your current accountant, discuss your concerns with them. If they do not make amends, do not hesitate to move on. Because a proactive and holistic accountant is worth their weight in gold.