Your most popular end of financial year questions, and answers

Taxes might be one of the two most important things in the world, but this doesn’t mean that there’s always certainty around them.

The nearing closing of the financial year (EOFY) is a time when many small business owners will be seeking the services of a professional accountant to make sure their affairs are in order. To help you make the most of the time you spend working with them, we’ve spoken to two top small-business accountants who have discussed their most frequent client EOFY concerns, so you can get an idea of what to expect.

Q. What can I do to claim my vehicle?

There’s more than one method. One option is to claim it as a kilometre allowance – that is a reimbursement to your company and is not a tax deductible benefit for you as an individual.

There are some requirements for an account book. However, if you have a record of your meetings as well as your movements via email, that can be enough to back up your claim.

Q. I’ve been earning some decent money. Should I consider buying an automobile at the end of the year in order to avoid tax?

When you are buying a car it should be about cash flow and not tax. You don’t get a real advantage by purchasing a vehicle right at the end of the trading year. You should consider your cash flow at the time of year’s beginning to maximize your allowance for depreciation and any interest.

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

You’ll have to enter into some kind of arrangement for payment. There are a few options to accomplish this. You can contact the tax department and establish a payment schedule however, interest will be charged and you will be penalized for late payments.

The alternative is that you could approach businesses that provide tax pooling. They’re able fund your tax payments via a pooling agreement and the interest rate is often significantly lower than the tax department. It’s also more flexible.

A small-business loan is another helpful option.

Q. What tax do I be required to pay?

There isn’t a quick, one-size-fits-all answer to this because it is wildly different in relation to the business structure you have as well as the taxes you’re registered for and the industry you work in.

We generally recommend that clients save between 20 and 25% of their earnings to cover tax on income as well as GST, Accident Compensation Corporation (ACC) levies , and any small surprise throughout the year.

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

Also, the answer will differ for each business owner depending on the industry, market and turnover.

It is possible to register for GST on your own when you’re likely to exceed the threshold or are undertaking an activity in which GST is included in industry costs as a standard.

Q. Do I need to perform a stocktake?

The short response is yes. There is an exemption which allows those with low values of stock to simply make an estimate of the inventory they have on hand. But if you’re operating a business that sells things, it’s important to know precisely how many items you have in your inventory to sell.

This process also identifies SLOBS (slow-moving and out-of-date inventory) and allows you to get rid of it without having to purchase it again, thus improving your cash flow.

Q. Can I do my EOFY taxes myself?

Yes, you can however, how do you go about doing it correctly? Today’s software allows you to easily run profits and losses, and to file a tax return with IRS. However, it doesn’t tell you what you can and can’t claim, and it does not analysis of your overall financial position.

Do you want to do it right this tax time? Discuss with your accountant the possibility of making sure you’ve checked all the right boxes.