Your most common EOFY questions, and answers

Taxes are perhaps one of two things that are certain in the world but this doesn’t mean that there’s always certainty around them.

The imminent final year of financial reporting (EOFY) means most small-scale business owners will be enlisting the services of a professional accountant to make sure all their financial affairs are in order. To make the most of your time working with them, we’ve spoken to two top small-business accountants who discussed their most frequent questions about EOFY from their clients to give you an idea of what to expect.

Q. What can I do to claim my car?

There’s more than one way. One method would be to claim it as the kilometre allowance, which reimburses the cost to your business , and does not have income ramifications for individuals.

There are certain requirements for the keeping of a logbook. But, if you’ve got an inventory of your events and activities through your email, that could be enough to back up your claim.

Q. I’ve been earning an amount of money. Should I consider buying an automobile at the close of the year to reduce tax?

When you purchase a vehicle it should be about cash flow and not tax. You’ll not gain any benefit by buying a car right at the end of the trading year. It is better to consider your cash flow at the start of each year to maximise the allowance for depreciation and interest.

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

You’re going to have to enter into some kind of payment agreement. There are many ways to do that. You can call the tax department to set up a payment plan but you will be charged interest and penalties are imposed in the event of a late payment.

There is another option: you might approach businesses offering tax pooling. They’re able to fund your tax bills by pooling them and the interest rate is usually a lot less than the tax department. It’s also more flexible.

A small business loan can be a helpful alternative.

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

There is no quick answer that can be standardized because it differs greatly according to your business structure, the taxes you are registered for and the industry you work in.

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

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

It is true that the answer varies for each business owner depending on their industry, the market they want to target and turnover.

You are free to sign up for GST if you’re anticipating to reach the threshold or engage in any activity where GST will be contained in the industry prices in the normal course.

Q. Do I need to perform a stocktake?

The simple conclusion is that yes. There’s an exemption that permits those with lower values of stock to simply guess the quantity they have in their inventory. However, if you are in the business of selling products, you should know exactly how many items you have on hand to sell.

This method also detects SLOBS (slow-moving and out-of-date stock) 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 however, how do you go about doing it correctly? The software available today allows you to easily run profits and losses, and file a return with your tax authorities. But 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 situation.

Want to get it right this tax time? Discuss with your accountant the possibility of making sure you’ve checked all the right boxes.