Inland Revenue could face claims for millions in tax refunds if clients of Ross Asset Management can satisfy it that their "income" never existed.
The Financial Markets Authority is pushing for Ross, a financial adviser headquartered in central Wellington, to be liquidated, after receivers warned of a $439 million shortfall compared with what clients believed they had.
Investors now face the prospect of recovering less than 3 cents in every dollar they thought they had with Ross.
But according to expert claims, those who drew a regular income from their investments - which was taxed - may get a refund if they can satisfy the IRD that they were in fact simply getting their original deposits back.
Bruce Tichbon, who heads a group of Ross investors, said a tax refund was the best remaining hope for many of the company's 900 clients.
Brent Gilchrist, a Wellington tax agent, said the Ross situation appeared to be similar to that of Don Rea, who died midway through a criminal trial brought by the Serious Fraud Office, which alleged he ran a Ponzi scheme. Most of the victims were in Taranaki and the Bay of Plenty.
Mr Gilchrist said he represented clients of Rea who claimed that the income they were receiving was in fact simply their original payments, so should not have been taxed.
After dragging its feet, Mr Gilchrist said, the IRD eventually agreed to give tax refunds case by case, even though a Ponzi scheme was never proven in court.
IRD declined to discuss individual cases, but said that, in general terms, the ability to get earlier tax returns would depend on whether a taxpayer had in reality earned the income they had previously declared.
"If investors can show that the income they had previously returned had, in fact, never been derived, then they can write to Inland Revenue and ask for the returns to be amended," a spokesman said.
Mr Tichbon said he had put a call out to investors several weeks ago to ask their accountants for advice on the tax implications of the suspected fraud.
While the advice had not been unanimous, he believed there was a case to put to the IRD.
"Because we're likely to see very little of our investments returned to us, for a lot of our members, the best prospect for getting anything back from this mess is the tax [refund]."
Investigators with the Financial Markets Authority and PWC have held their first meeting with David Ross who has been discharged from hospital after being held for three weeks under the Mental Health Act.
Mr Ross, the sole director of Ross Asset Management, issued a statement through law firm Chapman Tripp saying he would co-operate with "all inquiries into his company and the funds invested with it" after leaving hospital on Wednesday night.
"While these matters are the subject of official inquiries, Mr Ross and his family will be making no further comment."