Your most frequent end of financial year questions, answered

Taxes might be one of two things that are certain in the world, but this doesn’t mean there’s always certainty around them.

The nearing closing of the financial year (EOFY) means numerous small business owners will be enlisting the assistance of a professional accountant to ensure that all their financial affairs are in good order. To help you make most of the time you spend with them, we’ve spoken to two renowned small business accountants, who have provided their most frequently asked EOFY questions from clients, so you can get a head-start.

Q. How do I claim my vehicle?

There’s more than one way. One method would be to claim it as an allowance for kilometres – which is a reimbursement to your business , and does not have income ramifications for the individual.

There are certain requirements for the logbook. However, if there is the log of your meetings as well as your movements via email, it could be sufficient to support your claim.

Q. I’ve made quite a bit of money. Would it be worth purchasing a vehicle at the end of the year to reduce tax?

When you purchase a vehicle your decision should be about cash flow instead of tax. There isn’t any real advantage by purchasing a vehicle just at the end of your trading year. You should consider your cash flow at the start of each year to maximize your allowance for depreciation and interest.

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

You’ll have to sign a type of payment agreement. There are a few ways to do that. You can call the tax department to arrange a payment plan but you will be charged interest and penalties are imposed in the event of a late payment.

There is another option: you may approach companies offering tax pooling. They’re able to pay for tax obligations via a pooling agreement and the interest rate is often significantly lower than that of the department responsible for tax. Additionally, it’s more flexible.

A small business loan can be a useful alternative.

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

There is no quick, universal solution to this because it is wildly different in relation to the business structure you have as well as the taxes you’re legally obligated to pay, and the type of business that you are in.

We generally recommend that clients save around 20-25% of their revenue to pay for tax on income as well as GST, Accident Compensation Corporation (ACC) charges and other small surprises during the year.

Q. Should I be GST-registered for the coming year?

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

It is possible to register for GST on your own if you’re expecting to cross the threshold or are engaged in an activity that requires GST includes in the industry prices as a rule.

Q. Do I need to perform an inventory?

The short solution is yes. There is an exemption which allows people with low value of stock to just guess the quantity they have in their inventory. However, if you are involved in selling things, it’s important to know precisely how many items are available to sell.

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

Q. Can I do my EOFY taxes myself?

You can certainly do it but can you do it correctly? The software available today lets you easily track the numbers of a profit and loss and file a return with your tax authorities. However, it doesn’t tell you what you are allowed and can’t claim, and it doesn’t take a closer look at your overall financial position.

Are you looking to make sure that everything is in order this tax season? Discuss with your accountant the possibility of checking all the boxes.