The most common EOFY questions, and answers

Taxes might be one of the two most important things in the world of finance but this doesn’t mean that there’s ever a guarantee about them.

The looming approach of the final year of financial reporting (EOFY) will mean that many small business owners will seek the services of a professional accountant to ensure your affairs are in the right place. To help you make most of the time you spend together, we’ve talked to two renowned small business accountants who given their top questions about EOFY from their clients and give you an early start.

Q. How do I claim my car?

There’s more than one method. One method is to claim it on an allowance for kilometres – which will reimburse the cost to your business and does not impact your income for individuals.

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

Q. I’ve made an amount of money. Do I need to buy a vehicle at the end of the year to reduce tax?

When you purchase a vehicle your decision should be about cash flow and not tax. There isn’t any real benefit by buying a car towards the close of your trading year. You should consider your cash flow at starting of your year to increase the depreciation allowance as well as any interest.

Q. I’ve got no cash. How can I pay my tax bill?

You’ll have to agree to some type of arrangement to pay. There are a variety of ways to go about it. You can call the tax department and create a payment plan but the interest is charged and there are penalties for late payments.

Another option is that you can approach companies that offer tax pooling. They can fund your tax payments via a pooling agreement and the interest rate is usually lower than that of that of the department responsible for tax. It’s also a lot more flexible.

A small business loan is another effective alternative.

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

There is no simple solution that is universally applicable because it differs greatly based on your business structure and the tax rates you’re registered for and the industry you operate in.

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

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

The answer is different for each business owner depending on industry, target market and turnover.

You are free to sign up when you’re likely to exceed the threshold or are engaged in an activity in which GST will be contained in industry costs as a standard.

Q. Do I have to conduct a stocktake?

The simple response is yes. There is an exemption which permits those with lower values of stock to just estimate the stock they have on hand. If you’re operating a business that sells items, it’s smart to be aware of the number of things you have to sell.

This method also detects SLOBS (slow-moving and out-of-date stocks) which allows you to dispose of it without having to purchase it in the future, thereby improving your cash flow.

Q. Can I do my EOFY taxes myself?

Sure, you can however, can you do it correctly? Today’s software can make it simple to track profits and losses, and to file a tax return with the tax department. However, it doesn’t tell you what you are allowed and cannot claim, and isn’t able to take a look at your overall financial situation.

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