Your most frequent end of financial year questions, and answers

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

The nearing end of financial year (EOFY) implies that numerous small business owners will need the help of a professional accountant to ensure that your affairs are in the right place. To help you make the most of your time together, we’ve talked with two top small business accountants, who have shared their most common queries regarding EOFY with their clients, so you can get an advantage.

Q. What can I do to claim my vehicle?

There are many ways to do it. One way is to claim it as an allowance for kilometres – which covers the expense for your business and does not impact your income for your personal income.

There are certain requirements for the keeping of a logbook. But, if you’ve got a record of your meetings and activities through your email, that can be sufficient to justify your claim.

Q. I’ve been making a fair amount of money. Do I need to buy a car at the end of the year to reduce tax?

When you are buying a car it should be 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. You should consider your cash flow at the start of each 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?

It is necessary to enter into some kind of payment agreement. There are a variety of methods to achieve this. Contact the tax department and create a payment plan but you will be charged interest and penalties are imposed in the event of a late payment.

Another option is that you may approach companies offering tax pooling. They’re able fund your tax bills through a pooling arrangement , and the interest rate can be much lower than taxes paid by tax departments. It’s also more flexible.

A small business loan is another helpful option.

Q. How much tax will I be required to pay?

There is no simple, one-size-fits-all answer to this because it differs greatly depending on the structure of your business, the taxes you are legally obligated to pay, and the type of business you operate in.

We generally suggest that clients save roughly 20-25% of their turnover to help cover tax on income and GST, Accident Compensation Corporation (ACC) charges and other small surprises during the year.

Q. Do I need to be GST registered for the next financial year?

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

It is possible to register for GST on your own when you’re likely to exceed the threshold, or are engaging in any activity where GST can be included into industry prices in the normal course.

Q. Do I need to perform a stocktake?

The short solution is yes. There is an exemption which allows people with low value of stock to just guess the quantity they hold. However, if you are involved in selling products, you should be aware of the number of items you have in your inventory to sell.

This also helps identify SLOBS (slow-moving and out-of-date stocks) which allows you to dispose of the item and not purchase it in the future, thereby improving the flow of cash.

Q. Can I do my EOFY taxes myself?

Of course you can however, can you do it correctly? The software available today lets you easily track an income and loss and file a return with your tax authorities. However, it doesn’t tell you what you can and should not claim, and does not take a deeper examine your overall financial position.

Are you looking to make sure that everything is in order this tax time? Discuss with your accountant the possibility of making sure you’ve checked all the right boxes.