The most frequent end of financial year questions, and answers

Taxes might be one of only two certainties in the world, but this doesn’t mean there’s always certainty around them.

The imminent end of financial year (EOFY) will mean that most small-scale business owners will be seeking the aid of an experienced accountant to make sure they have their finances in good order. To make the most of the time you spend working with them, we’ve spoken to two renowned small business accountants who’ve given their top EOFY questions from clients in order to help you get a head-start.

Q. How do I claim my vehicle?

There are many ways to do it. One method is to claim it as an allowance for mileage – this will reimburse the cost to your business , and does not impact your income for your personal income.

There are rules for keeping the keeping of a logbook. However, if there is an account of your appointments and actions via your email, that could be enough to back up your claim.

Q. I’ve been earning quite a bit of money. Should I consider buying an automobile at the close of the year to reduce tax?

If you decide to purchase a car you should make the purchase about cash flow and not about tax. You don’t get a real advantage by purchasing a vehicle right at the end of the trading year. You’re better off assessing your cash flow at beginning of the year 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 agree to some type of payment arrangement. There are many ways to go about it. You can contact the tax department and create a payment plan but interest is charged and penalties are imposed if you miss your payment.

There is another option: you may approach companies offering tax pooling. They’re able to pay for your tax payments via a pooling agreement and the interest rate is often a lot less than that of the department responsible for tax. It’s also a lot more flexible.

A small-business loan is another effective option.

Q. What tax do I have to pay?

There isn’t a quick answer that can be standardized because it differs greatly depending on the structure of your business as well as the taxes you’re legally obligated to pay, and the type of business that you are in.

We generally suggest that clients save roughly 20-25% of their annual turnover to with taxation as well as GST, Accident Compensation Corporation (ACC) charges and other small surprises throughout the year.

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

Again, the answer varies for each business owner based on their industry, the market they want to target and turnover.

You are free to sign up for GST if you’re anticipating to reach the threshold, or are engaging in an activity in which GST will be contained in industry prices as a norm.

Q. Do I require an inventory?

The simple answer is yes. There is an exemption which lets those with low valuations of stock to simply make an estimate of the inventory they have on hand. However, if you are in the business of selling items, it’s smart to be aware of the number of items you have on hand to sell.

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

Q. Can I do my EOFY taxes myself?

Of course you can however, how do you go about doing it right? The software available today makes it easy to run the numbers of a profit and loss and to file a tax return with Tax Department. But it doesn’t tell the tax benefits you cannot claim, and isn’t able to take a analysis of your overall financial position.

Do you want to be sure you are doing it right this tax time? Speak to your accountant about ticking all the right boxes.