Your most frequent end of financial year questions, and answers

Taxes may be one of two things that are certain in the world but it doesn’t mean that there is always certainty around them.

The looming approach of the final year of financial reporting (EOFY) is a time when the majority of small-business owners will seek the services of a professional accountant to ensure they have their finances in order. To make the most of your time working with them, we’ve spoken with two top small business accountants who’ve shared their most common EOFY questions from clients in order to help you get an early start.

Q. What can I do to claim my vehicle?

There’s more than one method. One way is to claim it on a kilometre allowance – that reimburses the cost for your business and does not have income ramifications for your personal income.

There are some requirements for the keeping of a logbook. If you do have an inventory of your events and activities through your email, that could be sufficient to justify your claim.

Q. I’ve been making an amount of money. Do I need to buy an automobile at the close of the calendar year to lower tax?

When you buy a vehicle your decision should be about cash flow and not tax. You’ll not gain any advantage from purchasing a vehicle just at the end of your trading year. You should consider your cash flow at the start of each year in order to increase the depreciation allowance and interest.

Q. I’ve got no cash. How am I going to make my payment for tax?

You’ll have to enter into some kind of payment agreement. There are a few options to accomplish this. You can contact the tax department and establish a payment schedule but interest is charged and you will be penalized when you don’t make your payment.

You could approach businesses that provide tax pooling. They’re able to fund tax obligations through a pooling arrangement , and the interest rates are usually much lower than taxes paid by tax departments. They are also much more flexible.

A small-business loan is another useful alternative.

Q. What tax do I be required to pay?

There is no easy answer that can be standardized since it differs widely according to your business structure and the tax you are legally obligated to pay, and the type of business that you are in.

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

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

Also, the answer will differ for each business owner based on the type of business, the target market and turnover.

It is possible to register for GST on your own for GST if you’re anticipating to reach the threshold or engage in an activity that requires GST is included in industry costs as a standard.

Q. Do I have to conduct a stocktake?

The simple response is yes. There’s an exemption that allows people with low value of stock to just guess the quantity they have on hand. But if you’re in the business of selling items, it’s smart to know exactly how many items are available to sell.

This method also detects SLOBS (slow-moving and obsolete stock) so you can clear it and not order it once more, which will improve the flow of cash.

Q. Can I do my EOFY taxes myself?

You can certainly do it but can you do it right? The software available today lets you easily track an income and loss and then file a tax return with IRS. But it doesn’t tell you what you can and should not claim, and does not take a deeper review of your financial position.

Do you want to be sure you are doing it right this tax time? Consult your accountant about getting all the necessary boxes checked.