The most common end of financial year questions, and answers

Taxes might be one of two things that are certain in the world of finance but that doesn’t mean there is ever a guarantee about them.

The nearing close of the financial year (EOFY) means most small-scale business owners will be enlisting the aid of an experienced accountant to ensure they have their finances in good order. To help you make the most of the time you spend together, we’ve talked to two renowned small business accountants, who have provided their most frequently asked client EOFY concerns, so you can get an idea of what to expect.

Q. How do I claim my vehicle?

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

There are certain requirements for an account book. However, if you have an account of your appointments and actions via your email, that may be sufficient to justify your claim.

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

When you are buying a car it should be about cash flow and not about tax. You’ll not gain any advantage from purchasing a vehicle near the end of your year as a trader. You’re better off assessing your cash flow at time of year’s beginning to maximise the allowance for depreciation and interest.

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

You’ll have to agree to some type of payment agreement. There are a variety of ways to do that. You can reach out to the tax department and create a payment plan but the interest is charged and you will be penalized if you miss your payment.

Another option is that you can approach companies that offer tax pooling. They’re able to fund your tax payments through a pooling arrangement and the interest rates are usually significantly lower than those offered by the tax office. It’s also more flexible.

A small business loan is another useful option.

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

There is no easy answer that can be standardized since it differs widely according to your business structure as well as the taxes you’re required to pay and the field you operate in.

We typically recommend that clients save roughly 20-25% of their turnover to help cover income tax or GST Accident Compensation Corporation (ACC) taxes and any other little surprises throughout the year.

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

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

You can voluntarily register for GST if you’re anticipating to reach the threshold or engage in an activity where GST can be included into your industry costs as a standard.

Q. Do I require an inventory?

The simple conclusion is that yes. There’s an exemption that allows people with low value of inventory to estimate the stock they have available. If you’re operating a business that sells products, it is important to know precisely how many items you have on hand to sell.

This method also detects SLOBS (slow-moving and out-of-date stock) which allows you to dispose of it and not order it again, thus improving the flow of cash.

Q. Can I do my EOFY taxes myself?

You can certainly do it however, can you do it right? Software available today lets you easily track the numbers of a profit and loss and to file a tax return with the tax department. It doesn’t inform the tax benefits you can’t claim, and it does not examine your overall financial situation.

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