The most common end of financial year questions, answered

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

The imminent closing of the financial year (EOFY) means many small business owners will seek the services of a professional accountant to make sure their affairs are in the right place. To make the most of the time you spend with them, we’ve spoken to two top small-business accountants, who have discussed their most frequent questions about EOFY from their clients, so you can get a head-start.

Q. How can I claim my car?

There’s more than one method. One way would be to claim it as an allowance for kilometres – which covers the expense to your company and does not have income ramifications for the individual.

There are some requirements for the logbook. However, if there is an inventory of your events as well as your movements via email, it could be sufficient to support your claim.

Q. I’ve been earning quite a bit of money. Would it be worth purchasing a vehicle at the end of the year to save tax?

If you decide to purchase a car, the decision should be about cash flow and not tax. You won’t gain a significant advantage by purchasing a vehicle towards the close of your year as a trader. You’re better off assessing your cash flow at the start of each year to maximize the amount of depreciation allowance as well as any interest.

Q. I’ve got no cash. What can I do to pay my tax bill?

You’ll have to sign a type of payment arrangement. There are a variety of methods to achieve this. You can call the tax department to arrange a payment plan however, interest will be charged and you will be penalized when you don’t make your payment.

The alternative is that you might approach businesses offering tax pooling. They’re able to pay for tax obligations by pooling them and the interest rate is usually significantly lower than the tax department. Additionally, it’s more flexible.

A small-business loan is another helpful option.

Q. What is the amount of tax I have to pay?

There isn’t a quick, universal solution to this since it differs widely based on your business structure and the tax rates you’re required to pay and the field you operate in.

We usually recommend that our clients set aside between 20 and 25 percent of their annual turnover to with taxation, GST, Accident Compensation Corporation (ACC) charges and other small surprises all through the year.

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

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

It is possible to register for GST on your own when you’re likely to exceed the threshold or engage in an activity where GST can be included into the industry costs as a standard.

Q. Do I need to do an inventory?

The simple conclusion is that yes. There is an exemption which permits those with lower values of stock to just estimate the stock they hold. However, if you’re operating a business that sells items, it’s smart to know precisely how many items you have on hand to sell.

This also helps identify SLOBS (slow-moving and obsolete stock) to allow you to clear the item and not purchase it once more, which will improve your cash flow.

Q. Can I do my EOFY taxes myself?

Yes, you can, but will you do it correctly? The software available today allows you to easily run the numbers of a profit and loss and submit a tax return to the tax department. But it doesn’t tell the tax benefits you cannot claim, and does not take a deeper review of your financial position.

Do you want to be sure you are doing it right this tax season? Speak to your accountant about checking all the boxes.