The most popular end of financial year questions, and answers

Taxes may be one of only two certainties in this world however it doesn’t mean that there is always certainty around them.

The approaching end of financial year (EOFY) will mean that the majority of small-business owners will be enlisting the services of a professional accountant to make sure they have their finances in good order. In order to help you make the most of the time you spend together, we’ve talked with two top small business accountants, who have discussed their most frequent client EOFY concerns in order to help you get an advantage.

Q. How can I claim for my car?

There’s more than one method. One option would be to claim it as an allowance for mileage – this covers the expense for your business and does not impact your income for individuals.

There are rules for keeping a logbook. However, if you have a record of your meetings and activities through your email, that may suffice to prove your claim.

Q. I’ve made some decent money. Should I consider buying a car at the end of the calendar year to lower tax?

When you buy a vehicle, the decision should be about cash flow, not tax. There isn’t any real benefit by buying a car towards the close of the year you’ve been trading. You should consider your cash flow prior to the beginning of the year in order to increase the depreciation allowance and interest.

Q. I’ve got no cash. What can I do to make my payment for tax?

You’ll need to sign a type of payment arrangement. There are several ways to do that. You can call the tax department and create a payment plan however, interest will be charged and there are penalties when you don’t make your payment.

There is another option: you may approach companies offering tax pooling. They can fund your tax bills through a pooling arrangement , and the interest rate is often significantly lower than the tax department. They are also much more flexible.

A small business loan is another beneficial option.

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

There is no easy solution that is universally applicable as it varies wildly based on your business structure, the taxes you are paying and the sector you operate in.

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

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

It is true that the answer varies for every business owner based on the type of business, the target market and turnover.

You are able to register on your own when you’re likely to exceed the threshold or are undertaking an activity in which GST can be included into industry prices as a norm.

Q. Do I need to perform an inventory?

The short response is yes. There is an exemption which allows those with low values of stock to just guess the quantity they have on hand. However, if you’re in the business of selling products, it is important to know precisely how many items you have in your inventory to sell.

This also helps identify SLOBS (slow-moving and obsolete stocks) to allow you to clear it , and never purchase it in the future, thereby improving the flow of cash.

Q. Can I do my EOFY taxes myself?

Yes, you can however, can you do it correctly? The software available today allows you to easily run the numbers of a profit and loss and submit a tax return to your tax authorities. But it doesn’t tell you what you can and aren’t claiming, and isn’t able to take a review of your financial situation.

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