Your most popular EOFY questions, answered

Taxes are perhaps one of the two most important things in life However, that doesn’t mean there is never a certainty about them.

The approaching closing of the financial year (EOFY) means many small business owners will be seeking the aid of an experienced accountant to ensure that they have their finances in good order. To help you make the most of the time you spend together, we’ve talked to two renowned small business accountants who shared their most common EOFY questions from clients, so you can get an idea of what to expect.

Q. How do I claim my car?

There’s more than one way. One method is to claim it as a kilometre allowance – that will reimburse the cost to your business , and is not a tax deductible benefit for you as an individual.

There are rules for keeping the keeping of a logbook. If you do have an account of your appointments and activities through your email, that may be sufficient to support your claim.

Q. I’ve been earning an amount of money. Would it be worth purchasing a car at the end of the calendar year to lower tax?

When you are buying a car, the decision should be about cash flow instead of tax. You don’t get a real advantage by purchasing a vehicle right at the end of your trading year. You’re better off considering your cash flow prior to the time of year’s beginning in order to maximise the allowance for depreciation and interest.

Q. I’ve got no cash. How can I cover my taxes?

It is necessary to sign some sort of payment arrangement. There are a few options to accomplish this. You can contact the tax department to arrange a payment plan however, interest will be charged and penalties are imposed in the event of a late payment.

Another option is that you might approach businesses offering tax pooling. They’re able fund your tax payments by pooling them and the interest rate is often a lot less than that of the department responsible for tax. It’s also more flexible.

A small-business loan is another useful option.

Q. How much tax will I have to pay?

There isn’t a quick, one-size-fits-all answer to this as it varies wildly according to your business structure, the taxes you are legally obligated to pay, and the type of business you operate in.

We generally suggest that clients set aside between 20 and 25 percent of their earnings to cover tax on income and GST, Accident Compensation Corporation (ACC) taxes and any other little surprises throughout the year.

Q. Do I have to be GST-registered in the coming year?

It is true that the answer varies for each business owner , based on the industry, market and turnover.

You are able to register on your own when you’re likely to exceed the threshold or are engaged in an activity in which GST is included in industry prices in the normal course.

Q. Do I require a stocktake?

The simple response is yes. There’s an exemption that allows people with low value of inventory to estimate the stock they have on hand. If you’re in the business of selling things, it’s important to be aware of the number of items are available to sell.

This method also detects SLOBS (slow-moving and obsolete stock) and allows you to get rid of the item and not purchase it again, thus improving the flow of cash.

Q. Can I do my EOFY taxes myself?

Sure, you can however, can you do it right? The software available today allows you to easily run a profit and loss, and then file a tax return with IRS. But it doesn’t tell you what you are allowed and should not claim, and does not look at your overall financial situation.

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