The most common end of financial year questions, and answers

Taxes may be one of the only two guarantees in this world but that doesn’t mean there is ever a guarantee about them.

The imminent end of financial year (EOFY) implies that the majority of small-business owners will need the assistance of a professional accountant to ensure that their affairs are in the right place. To help you make most of the time you spend with them, we’ve spoken to two leading small business accountants who have given their top questions about EOFY from their clients in order to help you get an early start.

Q. How can I claim for my car?

There’s more than one method. One way would be to claim it on an allowance for kilometres – which covers the expense to your company and does not impact your income for the individual.

There are certain requirements for the logbook. But, if you’ve got an inventory of your events and activities through your email, that could be enough to back up your claim.

Q. I’ve been making an amount of money. Should I consider buying an automobile at the end of the year to reduce tax?

When you buy a vehicle, the decision should be about cash flow and not tax. You won’t gain a significant advantage by purchasing a vehicle just at the end of the year you’ve been trading. You’re better off considering your cash flow at beginning of the year to maximize the amount of depreciation allowance and interest.

Q. I’ve got no cash. How am I going to cover my taxes?

You’ll need to sign some sort of payment arrangement. There are a variety of methods to achieve this. You can reach out to the tax department to establish a payment schedule but the interest is charged and there are penalties for late payments.

You could approach businesses that provide tax pooling. They’re able to fund your tax payment through a pooling arrangement and the interest rate is usually lower than that of those offered by the tax office. It’s also a lot more flexible.

A small business loan is a effective alternative.

Q. How much tax will I have to pay?

There is no easy answer that can be standardized as it varies wildly according to your business structure and the tax you are required to pay and the field you work in.

We generally suggest that clients save around 20-25% of their turnover to help pay for tax on income as well as GST, Accident Compensation Corporation (ACC) levies , and any small surprise during the year.

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

The answer is different for every business owner based on the type of business, the target market and turnover.

You are able to register on your own if you’re expecting to cross the threshold, or are engaging in an activity that requires GST includes in your industry costs as a standard.

Q. Do I have to conduct a stocktake?

The short solution is yes. There is an exemption which lets those with low valuations of stock to just guess the quantity they have in their inventory. But if you’re operating a business that sells things, it’s important to know precisely how many items you have in your inventory to sell.

The process also flags SLOBS (slow-moving and out-of-date inventory) so you can clear the item and not purchase it again, improving your cash flow.

Q. Can I do my EOFY taxes myself?

Yes, you can however, can you do it right? Software available today allows you to easily run an income and loss and then file a tax return with Tax Department. However, it does not tell you what you can and aren’t claiming, and does not examine your overall financial position.

Want to get it right this tax time? Speak to your accountant about checking all the boxes.