Your most frequent end of financial year questions, and answers

Taxes could be one of only two certainties in the world of finance However, that doesn’t mean there is never a certainty about them.

The imminent end of financial year (EOFY) means the majority of small-business owners will be enlisting the aid of an experienced accountant to ensure all their financial affairs are in order. To help you make the most of the time you spend with them, we’ve spoken to two leading small business accountants, who have shared their most common questions about EOFY from their clients to give you a head-start.

Q. What can I do to claim my vehicle?

There’s more than one way. One option is to claim it on a kilometre allowance – that reimburses the cost to your business and doesn’t have any income implications for individuals.

There are certain requirements for a logbook. But, if you’ve got an account of your appointments as well as your movements via email, that could be enough to back up your claim.

Q. I’ve been earning quite a bit of money. Would it be worth purchasing a car at the end of the year to save tax?

When you buy a vehicle you should make the purchase about cash flow and not tax. You’ll not gain any advantage by purchasing a vehicle right at the end of the year you’ve been trading. You’re better off considering your cash flow at starting of your year to maximize the amount of depreciation allowance and interest.

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

You’re going to have to agree to some type of arrangement to pay. There are several options to accomplish this. You can call the tax department and set up a payment plan however, interest will be charged and penalties are imposed in the event of a late payment.

Another option is that you might approach businesses offering tax pooling. They’re able to fund tax obligations through a pooling arrangement and the interest rate is often lower than that of those offered by the tax office. It’s also a lot more flexible.

A small business loan can be a useful alternative.

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

There is no simple answer that can be standardized because it differs greatly in relation to the business structure you have, the taxes you are legally obligated to pay, and the type of business you work in.

We typically recommend that clients save roughly 20-25% of their annual turnover to pay for tax on income and GST, Accident Compensation Corporation (ACC) charges and other small surprises during the year.

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

The answer is different for every business owner based on the type of business, the target market and turnover.

It is possible to register for GST on your own in the event that you’re planning to cross the threshold or are engaged in any activity where GST includes in your industry prices in the normal course.

Q. Do I require an inventory?

The short answer is yes. There’s an exemption that lets those with low valuations of stock to simply guess the quantity they have on hand. However, if you’re operating a business that sells items, it’s smart to know precisely how many items are available to sell.

This process also identifies SLOBS (slow-moving and obsolete inventory) to allow you to clear it , and never purchase it once more, which will improve 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 allows you to easily run profits and losses, and then file a tax return with IRS. But it doesn’t tell you what you are allowed and can’t claim, and it isn’t able to take a examine your overall financial situation.

Are you looking to make sure that everything is in order this tax time? Talk to your accountant about ticking all the right boxes.