The most popular end of financial year questions, answered

Taxes might be one of the only two guarantees in life however it doesn’t mean that there is any guarantee that they will be paid.

The approaching closing of the financial year (EOFY) is a time when many small business owners will need the aid of an experienced accountant to ensure they have their finances in order. In order to help you make the most of your time together, we’ve talked to two leading small business accountants who shared their most common queries regarding EOFY with their clients to give you an idea of what to expect.

Q. How do I claim my car?

There’s more than one method. One method is to claim it as an allowance for kilometres – which covers the expense to your business , and is not a tax deductible benefit for individuals.

There are requirements for an account book. If you do have a record of your meetings and movements through your email, that could be sufficient to support your claim.

Q. I’ve been making quite a bit of money. Would it be worth purchasing an automobile at the close of the year to save tax?

If you decide to purchase a car your decision should be about cash flow, not tax. There isn’t any real benefit from buying a car right at the end of the trading year. It is better to consider your cash flow prior to the start of each year in order to maximize your allowance for depreciation as well as any interest.

Q. I’ve got no cash. How can I be able to pay for my tax bills?

You’re going to have to sign some sort of arrangement for payment. There are several ways to go about it. You can contact the tax department to arrange a payment plan but you will be charged interest and there are penalties in the event of a late payment.

There is another option: you might approach businesses offering tax pooling. They can fund your tax payments through a pooling arrangement and the interest rates are usually much lower than that of the department responsible for tax. It’s also a lot more flexible.

A small business loan can be a useful alternative.

Q. How much tax will I be required to pay?

There is no quick solution that is universally applicable since it differs widely based on your business structure as well as the taxes you’re registered for and the industry that you are in.

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

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

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

You are free to sign up when you’re likely to exceed the threshold or are engaged in any activity where GST includes in industry costs as a standard.

Q. Do I require a stocktake?

The simple answer is yes. There is an exemption which allows people with low value of stock to simply estimate the amount of stock they have on hand. If you’re operating a business that sells products, it is important to be aware of the number of items you have on hand to sell.

The process also flags SLOBS (slow-moving and obsolete inventory) and allows you to get rid of it without having to purchase it once more, which will improve your cash flow.

Q. Can I do my EOFY taxes myself?

Yes, you can however, how do you go about doing it right? Today’s software lets you easily track the numbers of a profit and loss and then file a tax return with your tax authorities. However, it doesn’t tell you what you are allowed and aren’t claiming, and does not take a deeper review of your financial situation.

Are you looking to make sure that everything is in order this tax season? Speak to your accountant about checking all the boxes.