The most common EOFY questions, answered

Taxes might be one of the two most important things in the world However, that doesn’t mean there is any guarantee that they will be paid.

The nearing final year of financial reporting (EOFY) implies that many small business owners will need the assistance of a professional accountant to ensure all their financial affairs are in order. To help you make most of the time you spend together, we’ve talked with two top small business accountants who’ve provided their most frequently asked questions about EOFY from their clients to give you a head-start.

Q. How can I claim my vehicle?

There are many ways to do it. One method would be to claim it as an allowance for kilometres – which covers the expense to your company and does not impact your income for you as an individual.

There are requirements for the logbook. If you do have the log of your meetings as well as your movements via email, that may 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 to reduce tax?

When you buy a vehicle your decision should be about cash flow instead of tax. You’ll not gain any advantage by purchasing a vehicle near the end of the trading year. You’re better off assessing your cash flow at start of each year in order to maximise the allowance for depreciation and interest.

Q. I’ve got no cash. How am I going to pay my tax bill?

You’re going to have to sign some sort of arrangement to pay. There are several methods to achieve this. You can call the tax department to establish a payment schedule however, interest will be charged as well as penalties in the event of a late payment.

There is another option: you can approach companies that offer tax pooling. They’re able to fund tax obligations via a pooling agreement and the interest rate is often much lower than the tax department. It’s also more flexible.

A small business loan is a helpful option.

Q. How much tax will I have to pay?

There is no simple, universal solution to this since it differs widely depending on the structure of your business and the tax rates you’re registered for and the industry you operate in.

We generally suggest that clients save around 20-25% of their revenue to cover income tax and GST, Accident Compensation Corporation (ACC) levies and any little surprises all through the year.

Q. Do I need to be GST registered for the coming financial year?

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

You can voluntarily register for GST if you’re anticipating to reach the threshold or are undertaking an activity that requires GST is included in industry prices as a norm.

Q. Do I need to do an inventory?

The simple answer is yes. There is an exemption which allows people with low value of stock to just estimate the stock they have in their inventory. If you’re in the business of selling things, it’s important to be aware of the number of items you have in your inventory to sell.

This process also identifies SLOBS (slow-moving and obsolete inventory) which allows you to dispose of the item and not purchase it once more, which will improve your cash flow.

Q. Can I do my EOFY taxes myself?

Yes, you can, but will you do it correctly? Software available today lets you easily track a profit and loss, and submit a tax return to your tax authorities. However, it doesn’t tell you what you are allowed and should not claim, and does not take a deeper look at your overall financial position.

Do you want to be sure you are doing it right this tax season? Speak to your accountant about making sure you’ve checked all the right boxes.