Your most common end of financial year questions, and answers

Taxes are perhaps one of only two certainties in the world however this doesn’t mean that there’s never a certainty about them.

The imminent close of the financial year (EOFY) is a time when most small-scale business owners will seek the assistance of a professional accountant to ensure that all their financial affairs are in order. In order to help you make the most of your time together, we’ve talked with two top small business accountants who shared their most common queries regarding EOFY with their clients to give you an idea of what to expect.

Q. How can I claim for my car?

There are many ways to do it. One way is to claim it on the kilometre allowance, which will reimburse the cost for your business and does not have income ramifications for the individual.

There are rules for keeping an account book. However, if you have a record of your meetings and actions via your email, that can be sufficient to justify your claim.

Q. I’ve made a fair amount of money. Would it be worth purchasing a vehicle at the end of the year in order to avoid tax?

When you are buying a car you should make the purchase about cash flow instead of tax. You don’t get a real advantage from purchasing a vehicle towards the close of the trading year. It is better to consider your cash flow at start of each year in order to increase the depreciation allowance as well as any interest.

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

It is necessary to enter into some kind of payment agreement. There are a few methods to achieve this. You can call the tax department and set up a payment plan but interest is charged and there are penalties when you don’t make your payment.

You could approach businesses that provide tax pooling. They’re able to fund your tax bills via a pooling agreement and the interest rate is usually lower than that of taxes paid by tax departments. It’s also more flexible.

A small business loan can be a helpful option.

Q. What is the amount of tax I be required to pay?

There is no easy solution that is universally applicable because it differs greatly based on your business structure and the tax rates you’re registered for and the industry you operate in.

We typically recommend that clients save roughly 20-25% of their earnings to cover income tax and GST, Accident Compensation Corporation (ACC) levies and any little surprises throughout the year.

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

The answer is different for each business owner depending on the industry, market and turnover.

It is possible to register for GST on your own for GST if you’re anticipating to reach the threshold, or are engaging in an activity where GST includes in your industry costs as a standard.

Q. Do I require a stocktake?

The short conclusion is that yes. There’s an exemption that allows those with low values of inventory to make an estimate of the inventory they have in their inventory. However, if you are involved in selling products, you should know precisely how many things you have to sell.

This process also identifies SLOBS (slow-moving and out-of-date inventory) so you can clear the item and not purchase it once more, which will improve your cash flow.

Q. Can I do my EOFY taxes myself?

Sure, you can however, can you do it correctly? The software available today allows you to easily run profits and losses, and file a return with IRS. But it doesn’t tell the tax benefits you aren’t claiming, and does not examine your overall financial position.

Do you want to be sure you are doing it right this tax season? Consult your accountant about checking all the boxes.