Your most common EOFY questions, and answers

Taxes could be one of two things that are certain in this world, but this doesn’t mean that there’s any guarantee that they will be paid.

The imminent final year of financial reporting (EOFY) means most small-scale business owners will be enlisting the services of a professional accountant to ensure your affairs are in the right place. To help you make most of your time with them, we’ve talked to two renowned small business accountants, who have shared their most common queries regarding EOFY with their clients, so you can get a head-start.

Q. How do I claim my car?

There’s more than one method. One option would be to claim it as an allowance for kilometres – which covers the expense to your business and is not a tax deductible benefit for you as an individual.

There are some requirements for the keeping of a logbook. However, if there is an account of your appointments as well as your movements via email, that may suffice to prove your claim.

Q. I’ve been making quite a bit of money. Should I consider buying an automobile at the end of the year to save tax?

When you buy a vehicle, the decision should be about cash flow, not tax. You’ll not gain any benefit by buying a car near 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 interest.

Q. I’ve got no cash. What can I do to make my payment for tax?

You’ll need to sign a type of payment agreement. There are a variety of ways to go about it. Contact the tax department to arrange a payment plan but interest is charged and you will be penalized in the event of a late payment.

You might approach businesses offering tax pooling. They’re able fund your tax payments via a pooling agreement and the interest rate is usually significantly lower than that of the department responsible for tax. They are also much more flexible.

A small business loan is a effective option.

Q. What amount of tax will I have to pay?

There isn’t a quick solution that is universally applicable as it varies wildly depending on the structure of your business and the tax rates you’re registered for and the industry that you are in.

We usually recommend that our clients save between 20 and 25% of their annual turnover to cover tax on income and GST, Accident Compensation Corporation (ACC) taxes and any other little surprises throughout the year.

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

The answer is different for every business owner based on the industry, market and turnover.

You can voluntarily register if you’re expecting to cross the threshold, or are engaging in an activity that requires GST can be included into your industry prices as a norm.

Q. Do I have to conduct an inventory?

The short solution is yes. There is an exemption which permits those with lower values of stock to just estimate the amount of stock they have on hand. If you’re in the business of selling items, it’s smart to know exactly how many items you have in your inventory to sell.

The process also flags SLOBS (slow-moving and obsolete stocks) which allows you to dispose of it , and never purchase it once more, which will improve your cash flow.

Q. Can I do my EOFY taxes myself?

Sure, you can but can you do it right? The software available today makes it easy to run the numbers of a profit and loss and file a return with the tax department. However, it doesn’t tell you what you are allowed and can’t claim, and it doesn’t take a closer analysis of your overall financial position.

Do you want to be sure you are doing it right this tax season? Talk to your accountant about making sure you’ve checked all the right boxes.