Your most frequent end of financial year questions, and answers

Taxes are perhaps one of the only two guarantees in the world of finance but this doesn’t mean there’s any guarantee that they will be paid.

The nearing closing of the financial year (EOFY) will mean that many small business owners will seek the help of a professional accountant to ensure that they have their finances in order. To help you make most of your time with them, we’ve spoken with two top small business accountants, who have given their top questions about EOFY from their clients, so you can get an early start.

Q. How can I claim for my car?

There’s many ways to. One way to do it is to claim it as an allowance for mileage – this is a reimbursement to your company and is not a tax deductible benefit for your personal income.

There are some requirements for the keeping of a logbook. However, if you have an account of your appointments and activities through your email, that could be enough to back up your claim.

Q. I’ve made a fair amount of money. Should I consider buying a car at the end of the year in order to avoid tax?

When you buy a vehicle it should be about cash flow instead of tax. You won’t gain a significant advantage from purchasing a vehicle towards the close of your trading year. You’re better off assessing your cash flow prior to the starting of your year to increase the depreciation allowance and any interest.

Q. I’ve got no cash. How do I pay my tax bill?

You’ll need to sign some sort of payment arrangement. There are many ways to go about it. You can contact the tax department and establish a payment schedule but you will be charged interest as well as penalties for late payments.

The alternative is that you could approach businesses that provide tax pooling. They’re able to fund your tax bills by pooling them 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 useful alternative.

Q. How much tax will I be required to pay?

There is no simple answer that can be standardized because it is wildly different in relation to the business structure you have and the tax you are paying and the sector that you are in.

We usually recommend that our clients save between 20 and 25% of their annual turnover to with taxation or GST Accident Compensation Corporation (ACC) taxes and any other little surprises all through the year.

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

It is true that the answer varies for each business owner based on the type of business, the target market and turnover.

You can voluntarily register in the event that you’re planning to cross the threshold or are undertaking an activity where GST will be contained in industry prices as a rule.

Q. Do I require a stocktake?

The simple answer is yes. There is an exemption which permits those with lower values of inventory to make an estimate of the inventory they have in their inventory. But if you’re operating a business that sells products, it is important to be aware of the number of items you have on hand to sell.

This also helps identify SLOBS (slow-moving and out-of-date stock) and allows you to get rid of it and not order it in the future, thereby improving the flow of cash.

Q. Can I do my EOFY taxes myself?

Yes, you can, but will you do it right? The software available today allows you to easily run the numbers of a profit and loss and to file a tax return with IRS. It doesn’t inform the tax benefits you aren’t claiming, and does not take a deeper look at your overall financial position.

Want to get it right this tax season? Consult your accountant about checking all the boxes.