The most common EOFY questions, answered

Taxes are perhaps one of two things that are certain in the world, but this doesn’t mean there’s always certainty around them.

The approaching final year of financial reporting (EOFY) implies that numerous small business owners will be enlisting the assistance of a professional accountant to ensure they have their finances in good order. To help you make most of the time you spend working with them, we’ve spoken to two renowned small business accountants who discussed their most frequent queries regarding EOFY with their clients in order to help you get an early start.

Q. How do I claim my car?

There’s more than one way. One method is to claim it on an allowance for mileage – this reimburses the cost for your business and doesn’t have any income implications for your personal income.

There are certain requirements for an account book. However, if you have an account of your appointments and activities through your email, it could be sufficient to justify your claim.

Q. I’ve earned an amount of money. Is it worth buying a vehicle at the end of the year in order to avoid tax?

If you decide to purchase a car it should be about cash flow and not tax. You’ll not gain any advantage from purchasing a vehicle towards the close of your trading year. You’re better off considering your cash flow at starting of your year in order to maximise the allowance for depreciation as well as any interest.

Q. I’ve got no cash. What can I do to cover my taxes?

It is necessary to agree to some type of arrangement for payment. There are a few methods to achieve this. Contact the tax department and create a payment plan but interest is charged and penalties are imposed when you don’t make your payment.

You may approach companies offering tax pooling. They’re able to pay for tax obligations via a pooling agreement and the interest rate can be significantly lower than those offered by the tax office. Additionally, it’s more flexible.

A small-business loan is another effective alternative.

Q. What tax do I be required to pay?

There isn’t a quick, one-size-fits-all answer to this as it varies wildly depending on the structure of your business and the tax you are paying and the sector you operate in.

We typically recommend that clients save around 20-25% of their revenue to pay for tax on income or GST Accident Compensation Corporation (ACC) levies and any little surprises during the year.

Q. Do I have to be GST-registered in the coming year?

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

You can voluntarily register for GST if you’re anticipating to reach the threshold, or are engaging in any activity where GST will be contained in industry costs as a standard.

Q. Do I require a stocktake?

The simple solution is yes. There’s an exemption that lets those with low valuations of stock to simply estimate the amount of stock they have in their inventory. But if you’re in the business of selling things, it’s important to know exactly how many items are available to sell.

This also helps identify SLOBS (slow-moving and obsolete inventory) so you can clear it and not order it again, improving your cash flow.

Q. Can I do my EOFY taxes myself?

Sure, you can however, how do you go about doing it correctly? The software available today lets you easily track an income and loss and to file a tax return with your tax authorities. It doesn’t inform you what you may and aren’t claiming, and doesn’t take a closer look at your overall financial situation.

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