Your most frequent EOFY questions, answered

Taxes may be one of only two certainties in life however that doesn’t mean there is always certainty around them.

The imminent closing of the financial year (EOFY) means many small business owners will seek the help of a professional accountant to make sure your affairs are in good working order. To help you make the most of the time you spend with them, we’ve talked to two renowned small business accountants who have discussed their most frequent EOFY questions from clients and give you an idea of what to expect.

Q. How can I claim my car?

There are many ways to do it. One option is to claim it on an allowance for kilometres – which reimburses the cost to your company and does not impact your income for your personal income.

There are requirements for the keeping of a logbook. But, if you’ve got the log of your meetings as well as your movements via email, it could be sufficient to support your claim.

Q. I’ve been earning a fair amount of money. Is it worth buying an automobile at the end of the year in order to avoid tax?

When you buy a vehicle, the decision should be about cash flow, not tax. There isn’t any real benefit by buying a car near the end of your year as a trader. You should consider your cash flow at the starting of your year in order to maximize your allowance for depreciation and any interest.

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

It is necessary to sign a type of arrangement for payment. There are many ways to do that. You can reach out to the tax department and arrange a payment plan but interest is charged and there are penalties when you don’t make your payment.

The alternative is that you might approach businesses offering tax pooling. They’re able to pay for your tax bills via a pooling agreement and the interest rate can be lower than that of the tax department. It’s also more flexible.

A small-business loan is another helpful option.

Q. What tax do I be required 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 registered for and the industry you operate in.

We generally suggest that clients set aside between 20 and 25 percent of their revenue to cover income tax as well as GST, Accident Compensation Corporation (ACC) charges and other small surprises during the year.

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

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

It is possible to register for GST on your own in the event that you’re planning to cross the threshold or are engaged in any activity where GST includes in industry prices as a rule.

Q. Do I need to do a stocktake?

The simple answer is yes. There is an exemption which allows those with low values of stock to just estimate the amount of stock they hold. But if you’re operating a business that sells products, you should be aware of the number of things you have to sell.

This process also identifies SLOBS (slow-moving and obsolete inventory) to allow you to clear it and not order 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? Software available today allows you to easily run profits and losses, and submit a tax return to your tax authorities. However, it doesn’t tell you what you are allowed and cannot claim, and does not take a deeper examine your overall financial situation.

Do you want to do it right this tax season? Consult your accountant about ticking all the right boxes.