Your most common end of financial year questions, and answers

Taxes are perhaps one of only two certainties in life However, it doesn’t mean that there is ever a guarantee about them.

The nearing closing of the financial year (EOFY) is a time when most small-scale business owners will be seeking the assistance of a professional accountant to ensure they have their finances in the right place. To help you make most of your time with them, we’ve spoken to two renowned small business accountants who have provided their most frequently asked questions about EOFY from their clients and give you a head-start.

Q. What can I do to claim my vehicle?

There’s more than one method. One way is to claim it on a kilometre allowance – that will reimburse the cost to your business and doesn’t have any income implications for you as an individual.

There are requirements for a logbook. However, if you have a record of your meetings as well as your movements via email, it could be sufficient to support your claim.

Q. I’ve been making some decent money. Is it worth buying a car at the end of the calendar year to lower tax?

When you buy a vehicle you should make the purchase about cash flow, not tax. You won’t gain a significant advantage by purchasing a vehicle just at the end of your year as a trader. It is better to consider your cash flow at starting of your year in order to maximize the amount of depreciation allowance and any interest.

Q. I’ve got no cash. How am I going to cover my taxes?

You’ll need to sign a type of payment agreement. There are a variety of ways to do that. You can call the tax department to establish a payment schedule however, interest will be charged as well as penalties if you miss your payment.

You might approach businesses offering tax pooling. They’re able to pay for your tax payments through a pooling arrangement and the interest rates are usually a lot less than that of the department responsible for tax. It’s also more flexible.

A small business loan can be a useful option.

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

There is no quick, universal solution to this since it differs widely based on your business structure, the taxes you are paying and the sector you work in.

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

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

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

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

Q. Do I need to perform a stocktake?

The short response is yes. There is an exemption which allows people with low value of inventory to estimate the stock they hold. But if you’re involved in selling products, it is important to know exactly how many items you have on hand to sell.

This also helps identify SLOBS (slow-moving and out-of-date stock) to allow you to clear it , and never purchase it again, improving the flow of cash.

Q. Can I do my EOFY taxes myself?

Of course you can, but will you do it correctly? Today’s software lets you easily track a profit and loss, and to file a tax return with Tax Department. However, it does not tell you what you can and can’t claim, and it doesn’t take a closer examine your overall financial position.

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