The most frequent end of financial year questions, answered

Taxes might be one of the only two guarantees in the world but it doesn’t mean that there is never a certainty about them.

The nearing end of financial year (EOFY) implies that numerous small business owners will need the aid of an experienced accountant to ensure that their affairs are in the right place. To help you make most of the time you spend together, we’ve talked to two renowned small business accountants, who have provided their most frequently asked queries regarding EOFY with their clients in order to help you get an early start.

Q. How can I claim for my vehicle?

There’s more than one method. One method would be to claim it on the kilometre allowance, which will reimburse the cost to your business and doesn’t have any income implications for the individual.

There are rules for keeping the logbook. If you do have an account of your appointments and activities through your email, that can be sufficient to justify your claim.

Q. I’ve made a fair amount of money. Should I consider buying an automobile at the close of the year to reduce tax?

When you are buying a car your decision should be about cash flow, not tax. You won’t gain a significant benefit from buying a car near the end of the trading year. You’re better off considering your cash flow prior to the time of year’s beginning to increase the depreciation allowance and interest.

Q. I’ve got no cash. How am I going to be able to pay for my tax bills?

You’ll have to sign some sort of payment arrangement. There are many ways to go about it. You can reach out to the tax department to arrange a payment plan however, interest will be charged as well as penalties if you miss your payment.

Another option is that you can approach companies that offer tax pooling. They’re able to fund your tax bills via a pooling agreement and the interest rates are usually lower than that of the tax department. It’s also more flexible.

A small business loan is a useful option.

Q. How much tax will I be required to pay?

There is no simple answer that can be standardized because it differs greatly depending on the structure of your business and the tax you are paying and the sector you operate in.

We generally recommend that clients save around 20-25% of their annual turnover to cover income tax as well as GST, Accident Compensation Corporation (ACC) taxes and any other little surprises throughout the year.

Q. Do I have to be GST-registered in the coming year?

Again, the answer varies for each business owner , based on the type of business, the target market and turnover.

You can voluntarily register if you’re expecting to cross the threshold or are engaged in any activity where GST is included in the industry costs as a standard.

Q. Do I need to do a stocktake?

The simple solution is yes. There is an exemption which allows people with low value of inventory to estimate the stock they have in their inventory. However, if you are in the business of selling products, you should know precisely how many items are available to sell.

The process also flags SLOBS (slow-moving and obsolete inventory) and allows you to get rid of it and not order it once more, which will improve your cash flow.

Q. Can I do my EOFY taxes myself?

Of course you can, but will you do it right? Software available today makes it easy to run a profit and loss, and file a return with IRS. However, it does not tell the tax benefits you aren’t claiming, and does not take a deeper review of your financial position.

Want to get it right this tax time? Speak to your accountant about making sure you’ve checked all the right boxes.