Your most frequent end of financial year questions, and answers

Taxes might be one of the only two guarantees in the world but that doesn’t mean there is never a certainty about them.

The looming approach of the close of the financial year (EOFY) implies that numerous small business owners will be enlisting the services of a professional accountant to ensure that all their financial affairs are in good working order. To help you make the most of the time you spend together, we’ve talked with two top small business accountants, who have given their top EOFY questions from clients and give you an idea of what to expect.

Q. How can I claim my car?

There’s many ways to. One option is to claim it on an allowance for kilometres – which will reimburse the cost to your company and doesn’t have any income implications for you as an individual.

There are some requirements for an account book. But, if you’ve got the log of your meetings and activities through your email, that may be sufficient to justify your claim.

Q. I’ve been making an amount of money. Should I consider buying an automobile at the close of the year in order to avoid tax?

When you purchase a vehicle you should make the purchase about cash flow instead of tax. You don’t get a real benefit from buying a car just at the end of the year you’ve been trading. You’re better off assessing your cash flow prior to the time of year’s beginning in order to maximize your allowance for depreciation and any interest.

Q. I’ve got no cash. What can I do to cover my taxes?

You’ll have to enter into some kind of arrangement for payment. There are a few ways to go about it. You can contact the tax department and create a payment plan but you will be charged interest and you will be penalized if you miss your payment.

The alternative is that you may approach companies offering tax pooling. They can fund your tax payments by pooling them and the interest rate is often lower than that of taxes paid by tax departments. Additionally, it’s more flexible.

A small-business loan is another effective alternative.

Q. What amount of 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 registered for and the industry that you are in.

We typically recommend that clients save between 20 and 25% of their revenue to cover income tax, GST, Accident Compensation Corporation (ACC) levies , and any small surprise throughout the year.

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

It is true that the answer varies for each business owner , based on their industry, the market they want to target and turnover.

You are free to sign up for GST if you’re anticipating to reach the threshold, or are engaging in an activity in which GST can be included into the industry costs as a standard.

Q. Do I need to perform a stocktake?

The short solution is yes. There’s an exemption that lets those with low valuations of inventory to estimate the stock they have on hand. If you’re involved in selling products, you should know precisely how many items you have in your inventory to sell.

This method also detects SLOBS (slow-moving and out-of-date inventory) which allows you to dispose of it , and never purchase it once more, which will improve your cash flow.

Q. Can I do my EOFY taxes myself?

You can certainly do it but can you do it correctly? Today’s software lets you easily track the numbers of a profit and loss and then file a tax return with the tax department. But it doesn’t tell you what you are allowed and cannot claim, and isn’t able to take a look at your overall financial situation.

Do you want to do it right this tax time? Consult your accountant about making sure you’ve checked all the right boxes.