The most frequent end of financial year questions, answered

Taxes could be one of two things that are certain in life however this doesn’t mean there’s ever a guarantee about them.

The imminent end of financial year (EOFY) implies that the majority of small-business owners will be seeking the assistance of a professional accountant to make sure your affairs are in order. To help you make the most of your time together, we’ve talked to two renowned small business accountants who shared their most common queries regarding EOFY with their clients, so you can get an early start.

Q. How do I claim my car?

There are many ways to do it. One way would be to claim it as an allowance for mileage – this is a reimbursement to your company and doesn’t have any income implications for you as an individual.

There are certain requirements for the logbook. However, if there is an account of your appointments and activities through your email, that may be enough to back up your claim.

Q. I’ve been earning some decent money. Would it be worth purchasing a car at the end of the year to reduce tax?

If you decide to purchase a car you should make the purchase about cash flow and not about tax. You don’t get a real advantage by purchasing a vehicle right at the end of the year you’ve been trading. It is better to consider your cash flow at beginning of the year to maximise the allowance for depreciation and any interest.

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

You’ll need to agree to some type of arrangement to pay. There are many ways to do that. You can contact the tax department and create a payment plan but interest is charged and there are penalties for late payments.

Another option is that you might approach businesses offering tax pooling. They’re able to fund your tax payment via a pooling agreement and the interest rate is often lower than that of that of the department responsible for tax. Additionally, it’s more flexible.

A small business loan can be a useful alternative.

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

There is no simple answer that can be standardized because it is wildly different in relation to the business structure you have and the tax you are paying and the sector you operate in.

We typically recommend that clients save roughly 20-25% of their turnover to help with taxation as well as GST, Accident Compensation Corporation (ACC) taxes and any other little surprises throughout the year.

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

Also, the answer will differ for each business owner depending on the industry, market and turnover.

You are free to sign up for GST if you’re anticipating to reach the threshold or are engaged in an activity where GST is included in your industry prices as a rule.

Q. Do I need to perform an inventory?

The short solution is yes. There’s an exemption that allows people with low value of inventory to estimate the stock they have available. But if you’re operating a business that sells products, you should know exactly how many items you have in your inventory to sell.

The process also flags SLOBS (slow-moving and obsolete stock) and allows you to get rid of it without having to purchase it in the future, thereby improving the flow of cash.

Q. Can I do my EOFY taxes myself?

Yes, you can, but will you do it correctly? The software available today makes it easy to run profits and losses, and then file a tax return with Tax Department. It doesn’t inform you what you are allowed and can’t claim, and it does not review of your financial situation.

Do you want to be sure you are doing it right this tax season? Discuss with your accountant the possibility of ticking all the right boxes.