The most common end of financial year questions, answered

Taxes may be one of only two certainties in life but this doesn’t mean that there’s never a certainty about them.

The looming approach of the closing of the financial year (EOFY) implies that the majority of small-business owners will be seeking the assistance of a professional accountant to ensure that all their financial affairs are in good working order. To make the most of the time you spend with them, we’ve spoken to two renowned small business accountants who’ve shared their most common EOFY questions from clients in order to help you get an advantage.

Q. How do I claim my car?

There’s many ways to. One method is to claim it on an allowance for mileage – this covers the expense to your business and is not a tax deductible benefit for your personal income.

There are requirements for the keeping of a logbook. However, if there is the log of your meetings and movements through your email, that may be sufficient to justify your claim.

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

When you buy a vehicle your decision should be about cash flow instead of tax. You’ll not gain any benefit by buying a car just at the end of the year you’ve been trading. It is better to consider your cash flow at the time of year’s beginning in order to maximize the amount of depreciation allowance as well as any interest.

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

It is necessary to enter into some kind of arrangement to pay. There are a few options to accomplish this. You can reach out to the tax department to create a payment plan but interest is charged and you will be penalized in the event of a late payment.

Another option is that you might approach businesses offering tax pooling. They can fund tax obligations by pooling them and the interest rate can be a lot less than that of the department responsible for tax. It’s also a lot more flexible.

A small business loan can be a beneficial alternative.

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

There is no simple, universal solution to this because it differs greatly based on your business structure and the tax you are legally obligated to pay, and the type of business that you are in.

We generally suggest that clients set aside between 20 and 25 percent of their annual turnover to pay for tax on income as well as GST, Accident Compensation Corporation (ACC) charges and other small surprises throughout the year.

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

Also, the answer will differ for each business owner depending on their industry, the market they want to target and turnover.

You are able to register on your own for GST if you’re anticipating to reach the threshold or engage in an activity where GST includes in your industry costs as a standard.

Q. Do I need to perform a stocktake?

The simple answer is yes. There is an exemption which allows people with low value of stock to just make an estimate of the inventory they have available. If you’re involved in selling products, it is important to know precisely how many items are available to sell.

This method also detects SLOBS (slow-moving and obsolete stocks) which allows you to dispose of it without having to purchase it once more, which will improve the flow of cash.

Q. Can I do my EOFY taxes myself?

Of course you can, but will you do it right? Today’s software allows you to easily run a profit and loss, and file a return with IRS. However, it doesn’t tell you what you can and cannot claim, and does not take a deeper examine your overall financial situation.

Are you looking to make sure that everything is in order this tax season? Discuss with your accountant the possibility of making sure you’ve checked all the right boxes.