Your most frequent end of financial year questions, answered

Taxes are perhaps one of two things that are certain in life but this doesn’t mean there’s never a certainty about them.

The imminent final year of financial reporting (EOFY) will mean that most small-scale business owners will be enlisting the aid of an experienced accountant to make sure your affairs are in good order. To help you make the most of your time working with them, we’ve spoken to two leading small business accountants who’ve shared their most common client EOFY concerns in order to help you get an early start.

Q. How can I claim my vehicle?

There’s more than one way. One way to do it would be to claim it on a kilometre allowance – that reimburses the cost for your business and does not have income ramifications for individuals.

There are requirements for a logbook. If you do have the log of your meetings and movements through your email, that could suffice to prove your claim.

Q. I’ve earned some decent money. Should I consider buying an automobile at the end of the year to reduce tax?

When you buy a vehicle your decision should be about cash flow and not about tax. There isn’t any real advantage from purchasing a vehicle near the end of your year as a trader. You should consider your cash flow prior to the start of each year to maximize your allowance for depreciation and any interest.

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

You’re going to have to sign some sort of arrangement for payment. There are several ways to do that. Contact the tax department to establish a payment schedule however, interest will be charged and penalties are imposed when you don’t make your payment.

The alternative is that you may approach companies offering tax pooling. They’re able to fund your tax bills via a pooling agreement and the interest rate is usually a lot less than that of the department responsible for tax. They are also much more flexible.

A small business loan can be a beneficial option.

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

There is no quick answer that can be standardized because it differs greatly based on your business structure, the taxes you are paying and the sector that you are in.

We typically recommend that clients save between 20 and 25% of their turnover to help cover tax on income, GST, Accident Compensation Corporation (ACC) levies and any little surprises throughout the year.

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

The answer is different for each business owner , based on the industry, market and turnover.

You are able to register on your own if you’re expecting to cross the threshold or are undertaking an activity where GST includes in your industry prices as a norm.

Q. Do I require a stocktake?

The short solution is yes. There’s an exemption that allows those with low values of inventory to make an estimate of the inventory they have in their inventory. However, if you’re involved in selling items, it’s smart to know exactly how many items you have in your inventory to sell.

This method also detects SLOBS (slow-moving and obsolete inventory) so you can clear it , and never purchase it again, thus improving the flow of cash.

Q. Can I do my EOFY taxes myself?

Of course you can but can you do it correctly? The software available today makes it easy to run a profit and loss, and file a return with your tax authorities. It doesn’t inform the tax benefits you should not claim, and does not take a deeper look at your overall financial position.

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