The most common EOFY questions, answered

Taxes may be one of two things that are certain in the world of finance but that doesn’t mean there is any guarantee that they will be paid.

The approaching final year of financial reporting (EOFY) is a time when many small business owners will be enlisting the aid of an experienced accountant to make sure your affairs are in the right place. To help you make the most of your time together, we’ve talked to two top small-business accountants who have shared their most common queries regarding EOFY with their clients to give you a head-start.

Q. How do I claim my car?

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

There are rules for keeping the keeping of a logbook. However, if there is a record of your meetings and movements through your email, that could suffice to prove your claim.

Q. I’ve earned quite a bit of money. Is it worth buying a car at the end of the calendar year to lower tax?

When you are buying a car it should be about cash flow, not tax. You’ll not gain any benefit from buying a car towards the close of your trading year. It is better to consider your cash flow at start of each year to maximize your allowance for depreciation as well as any interest.

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

It is necessary to enter into some kind of payment arrangement. There are a few ways to go about it. You can call the tax department and establish a payment schedule but the interest is charged and there are penalties when you don’t make your payment.

You can approach companies that offer tax pooling. They’re able to fund your tax payments through a pooling arrangement , and the interest rate is usually much lower than taxes paid by tax departments. It’s also more flexible.

A small business loan can be a beneficial option.

Q. What tax do I be required to pay?

There is no simple, one-size-fits-all answer to this since it differs widely depending on the structure of your business, the taxes you are required to pay and the field you work in.

We generally recommend that clients save roughly 20-25% of their revenue to pay for tax on income as well as GST, Accident Compensation Corporation (ACC) levies and any little surprises throughout the year.

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

Again, the answer varies for each business owner depending 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 engage in an activity that requires GST will be contained in industry prices in the normal course.

Q. Do I need to do an inventory?

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

This also helps identify SLOBS (slow-moving and out-of-date stocks) and allows you to get rid of it without having to purchase it once more, which will improve the flow of cash.

Q. Can I do my EOFY taxes myself?

Yes, you can but can you do it right? Software available today lets you easily track the numbers of a profit and loss and to file a tax return with the tax department. However, it does not tell you what you are allowed and can’t claim, and it does not take a deeper analysis of your overall financial position.

Are you looking to make sure that everything is in order this tax season? Discuss with your accountant the possibility of checking all the boxes.