Your most popular end of financial year questions, answered

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

The imminent final year of financial reporting (EOFY) implies that the majority of small-business owners will seek the assistance of a professional accountant to ensure your affairs are in the right place. To help you make most of your time working with them, we’ve spoken with two top small business accountants who provided their most frequently asked EOFY questions from clients to give you an early start.

Q. How do I claim my car?

There’s more than one method. One way would be to claim it as an allowance for kilometres – which will reimburse the cost to your business and is not a tax deductible benefit for the individual.

There are rules for keeping the logbook. But, if you’ve got an inventory of your events as well as your movements via email, that could be sufficient to support your claim.

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

When you purchase a vehicle your decision should be about cash flow instead of tax. You won’t gain a significant benefit by buying a car near the end of the trading year. It is better to consider your cash flow at beginning of the year in order to maximize the amount of depreciation allowance and interest.

Q. I’ve got no cash. What can I do to pay my tax bill?

It is necessary to agree to some type of payment arrangement. There are a few options to accomplish this. You can reach out to the tax department to arrange a payment plan however, interest will be charged as well as penalties in the event of a late payment.

Another option is that you may approach companies offering tax pooling. They’re able to pay for your tax payment via a pooling agreement and the interest rate is often significantly lower than those offered by the tax office. Additionally, it’s more flexible.

A small business loan is another helpful alternative.

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

There isn’t a quick, one-size-fits-all answer to this because it is wildly different according to your business structure and the tax rates you’re registered for and the industry that you are in.

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

Q. Do I need to be GST registered for the following financial year?

Again, the answer varies for each business owner , based on the type of business, the target 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 in which GST will be contained in your industry prices as a rule.

Q. Do I require an inventory?

The simple response is yes. There’s an exemption that lets those with low valuations of stock to simply estimate the amount of stock they have in their inventory. However, if you are in the business of selling products, you should know exactly how many items you have on hand to sell.

The process also flags SLOBS (slow-moving and obsolete stock) which allows you to dispose of it , and never purchase it in the future, thereby improving your cash flow.

Q. Can I do my EOFY taxes myself?

Sure, you can however, how do you go about doing it right? Software available today lets you easily track an income and loss and then file a tax return with Tax Department. However, it doesn’t tell the tax benefits you should not claim, and doesn’t take a closer analysis of your overall financial situation.

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